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Data Privacy and Security: What’s Next for Debt Collectors?

Data Privacy and Security: What’s Next for Debt Collectors?

Data privacy and data security are two very hot topics in the ARM industry today. The California Consumer Privacy Act (CCPA) is set to take effect in January 2020, with additional privacy bills now pending in at least 25 states. Meanwhile, cyber crimes involving consumers’ personal data are growing in number, size, and sophistication.

While ARM business leaders are rightly focused on these issues, many are uncertain about the true nature and extent of their compliance and security risks. They’re also not sure how to manage these risks effectively.
 
Recently, I had the privilege of joining two distinguished industry colleagues for a panel discussion about data privacy and security: Odia Kagan, partner and chair of the GDPR Compliance and International Privacy division at Fox Rothschild LLP; and Ben Johnson, director of risk management for Cornerstone Support.
 
Here are some, but not all, of the major issues and topics we addressed (you can access the full webinar here).
 
 

Data privacy: Understanding and Preparing for the CCPA

The CCPA applies to any business or service provider that collects personal data, determines the purpose and means of data use, or controls or is controlled by such a company.
 
Starting January 1, 2020, the CCPA will grant California residents certain rights pertaining to personal data collected since January 2019 (a 12-month look-back window). Residents will be able to file claims for data access or deletion or for an opt out. Companies subject to the CCPA will have 45 days to respond.
 
Types and uses of data covered under the law run the gamut. Personal data can include everything from Social Security numbers and birth dates to lead generation activity, online browsing history, and interactions with mobile apps.
 
 
“Information like name, email address, collections history, purchase history, payment history, and determinations that you make off this (this person is likely to pay on time, they’re not likely to pay on time)—all of those things were not considered personal information in the traditional sense under U.S. law. That all has changed.” – Odia Kagan
 
Your business may be in scope if you do business in California and meet the minimum business thresholds listed below.
 
For purposes of CCPA compliance, doing business in California means:
 
  • Your headquarters are in California;
  • Your employees are in California;
  • Your company is incorporated in California;
  • Your company satisfies the definition of a California foreign entity; or
  • You conduct out-of-state sales or transactions into California.

 

Minimum business thresholds are defined as:

 

  • You conduct business activities in California and your annual revenues exceed $25 million;
  • You’re involved with personal data of more than 50,000 consumers, households, or devices (this could even include unique blog visitors); or
  • Sales of personal information—including value acquired from its use (via data analytics, for example)—accounts for at least 50% of your annual revenues.
 
To better understand how CCPA might affect your business and to prepare for its impact, you’ll want to take the six important steps Odia outlined in detail:
 
  • Map your data flows and processes
  • Determine your role under the law (independent business, service provider, or vendor)
  • Look carefully at legal purpose as well as GLBA and FCRA exemptions and whether they apply
  • Determine how you’ll comply with consumer requests within the required 45-day window
  • Reevaluate your internal processes
  • Plan for CCPA disclosure
 
 
“So it’s basically looking at processes, looking at the information, seeing how [you] get to it, how [you] can produce it. Then the other question is, ‘Once I know how to collect all of this information, how do I provide the disclosure that CCPA requires me to provide along with all the information I am giving?’” – Odia Kagan
 
 

Data security: Reducing the Risk and Impact of Cyber Crime

As Ben reminded us, cyber crime has been called “the greatest transfer of wealth in history.” The exchange of consumer data via ID theft, phishing, hacking, etc. has been compared with the global drug trade and is estimated to be worth as much as a trillion dollars per year.
 
Guarding against breaches and developing a breach response plan are essential for managing risk and minimizing disruption, financial losses, and potential harm to client relationships.
 
 
Have a specific plan in place
In a security breach “fire drill,” you should know whom to call and what steps to take. Ben recommends, among other things, a cyber liability insurance policy (with full limit breach notification response), an established reporting process, and discussions with a claim adjuster and legal counsel. A breach response should also include forensic analysis to assess the source and extent of the damage.
 
 
“Some of you saw there was a high-profile breach in the collection space earlier this year. One of the things that came out . . . was that maybe they took a little bit longer to get a plan in place and respond. And so at times, that can make the cost even greater or the damage even greater.” – Ben Johnson
 
 
Monitor operations in real time
Many companies enlist a dedicated third-party provider to monitor operations and flag any security weaknesses and unusual activity. Identifying problems early on will allow you to limit or compartmentalize the damage.
 
 
Change the way you store old data
Many high-profile breaches have involved personal information that dates back 10 or more years. Storing too many old records is a serious potential liability. By encrypting older files and offloading them to an external (ideally cloud-based) server, you can effectively make the data worthless to hackers and avoid triggering notification responses.
 
 
“[Data] almost was seen as a . . . valuable asset—to have all this data, all of this knowledge, all of this experience. And secondly, data storage is relatively cheap. So another year goes by, another million records go on the server. [ . . . ] I think as an industry, collectively, we’ve really got to start sharing best practices, talking about what we’re doing to get old files offloaded.” – Ben Johnson
 
 

For More Answers and Advice, Catch the Complete Webinar

During our panel discussion, Odia and Ben covered a lot of territory. They offered detailed insights on the above topics and raised a number of other issues ARM business owners need to consider. “Straight Talk About Privacy, Security, and Cyber Liability for Debt Collectors” is one webinar you won’t want to miss. Download and view it today.
 

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

CFPB Proposed Rules: 6 Debt Collection Practices Consumers Hope to Prevent

CFPB Proposed Rules: 6 Debt Collection Practices Consumers Hope to Prevent

The ARM industry and consumers see the CFPB’s proposed rules through very different lenses. Collection agencies are trying to get ahead of what may be the final rules so they’re ready to comply, while consumers are demanding clear, unequivocal protection from potential harassment and abuse.
 
Despite the CFPB’s best intentions and the commendable work it has done, its interpretation of the Fair Debt Collection Practices Act (FDCPA) isn’t exactly as either group had hoped.
 
For agencies, there are still open questions about how and when they can communicate with consumers across multiple channels without triggering complaints and legal action. For consumer advocates, the rules provide little reassurance and, if anything, give them new reasons to worry.
 
 
Consumer expectations alone do not create new legal requirements under the law, but creditors expect the agencies they enlist to treat consumers fairly.
 
For ARM businesses looking to become customer service and industry leaders, understanding how consumers view the proposed CFPB rules and why should be of utmost importance.
 
 
I recently sat down with my longtime friend Margot Saunders, senior counsel for the National Consumer Law Center and a former managing attorney for the NCLC office in Washington, D.C. We shared our perspectives on the CFPB’s proposed rules, and Margot raised a number of issues she believes the rules fail to address or, in some cases, create on their own.
 
 
 

1.  Confusion Over the Need for E-Sign Consent for All “Required Disclosures”

Consumers do not oppose the use of electronic delivery of written communications per se, but they do expect E-Sign to be followed, particularly when it comes to the electronic delivery of required disclosures.
 
This is a big point of contention for consumer advocates, who argue that sending writings to an email address previously used without having to verify consent or receipt of the message is wildly unfair. They hope the CFPB addresses the apparent E-Sign loophole that allows collectors to choose whether to comply, even when emailing validation notices.
 
 
“The new rules should not deviate from the statutory requirements of E-Sign. Regardless of what the statute says, you always must make sure that validation notice is sent either in paper form by snail mail or by email after receiving some kind of E-Sign consent from the consumer.” – Margot Saunders
 
 

2.  Excessive Calling, Unlimited Texting

The proposed rules allow for a high number of calls, as call caps are per debt (not per consumer), and there is no limit to the number of texts an agency can send. The rules appear to grant ARM businesses safe harbor from legal claims as long as they don’t exceed call caps—even if they place dozens of calls per week to a single consumer. To Margot and others, the CFPB has failed consumers in this regard.
 
 
“The rule does permit consumers to say, ‘Stop calling or stop texting or stop communicating with me via any particular medium,’ and we think that’s good. We’re a little disappointed there’s not some requirement to tell consumers they have that right.” – Margot Saunders
 
 

3.  Sending Emails and Hyperlinks Without Taking Internet Access Into Account

Millions of families access the internet only through their smartphones and have limited Wi-Fi access. For consumer advocates, this raises concerns about whether emails are received, hyperlinks are accessible, and information can be read on a small screen.
 
Consumer advocates believe the proposed rules effectively treat a lack of response to an email as consent, which Margot calls “an absurd proposal,” since emails are presumed received when they may not be.
 
 
“Tricking the consumer into paying something or having to respond to a garnishment notice because they missed all the prior notices isn’t good policy.” – Margot Saunders
 
 

4.  Texting for Non-Writing Communications

Consumer advocates fear collectors will send texts, and communicate back and forth, without knowing whether they’re engaging the right consumer. If the wrong consumer responds with a request to verify the debt, collectors may reveal personal or account-related information and violate consumers’ privacy.
 
 
“We’re proposing in our comments that for the original communication . . . texts comply with the reassigned number database to ensure they are actually dealing with [the right consumer].” – Margot Saunders
 
 

5.  Sending Limited Content Messages

The concept of a limited content message—a voicemail message, for example, or even a message left with a live person—is, to Margot and others, “nonsense.” Not only do consumer groups believe these messages go far outside of legal bounds, but they wonder why voicemails are even necessary in an age of smart phones and electronic communications.
 
 
“In my opinion, and the opinion of my colleagues and a lot of other people, there is no statutory authority for the Bureau to authorize communication that is not covered under the rules for all communications.” – Margot Saunders
 
 

6.  Threatening to Sue to Recover Out-of-Statute Debts

There is a possibility under the proposed rules that consumers could be persuaded to revive an old debt and then be threatened with a lawsuit (despite existing laws against such behavior), as the proposed CFPB rules don’t require agencies to notify consumers of their rights/risks related to out-of-statute debt. In addition, consumers would have a hard time proving that a years-old debt had, in fact, been paid off.
 
 
“We think it’s very hard to imagine why the new rules do not contemplate a disclosure that appropriately apprises the least sophisticated consumer of the risks of paying an out-of-statute debt. This proposed rule goes backwards in allowing threats of litigation or actual litigation.” – Margot Saunders
 
 

Tune in to Hear Both Perspectives

During my conversation with Margot, I shared my own legal and practical interpretations. At times, we engaged in a healthy debate. But Margot and I were in complete agreement that agencies must protect consumers from unfair practices. Where clear boundaries and directives are lacking, we’re both actively advocating for change.
 
If you want to better understand what consumers expect, and reevaluate your communications strategy in that light, I encourage you to take a listen to this informative discussion. You can download the free webinar here.
 

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

An All-In-One Solution

What does it take to communicate with consumers on their terms, comply with changing rules, and keep operating costs low? Cloud-based contact management, fully integrated and automated, holds the key. Learn more about the all-in-one platform that can transform daily operations, customer service, and collection results.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

What the CFPB Rules Mean to You: An Expert Panel Weighs In – Part 2

What the CFPB Rules Mean to You: An Expert Panel Weighs In – Part 2

If you missed Part 1 of “What the CFPB Rules Mean to You,” and you’re concerned about how the proposed rules might affect your operations, I recommend giving it a read. Based on a panel discussion I recently participated in (you can access the webinar here), Part 1 offers a detailed summary of the CFPB’s proposals as well as areas of concern related to call caps, electronic communications, and limited content messages.

This post covers the remainder of our discussion. Following a brief summary of validation notices/required disclosures, I’ll explain the changes and strategies you should consider pursuing long term and what you should be focused on right now.

 

Validation Notices/Required Disclosures

The CFPB’s proposed rules for validation notices and disclosures put some new twists on a number of well-established ARM industry standard operating procedures—and in some cases, with big implications for collection agencies and consumers.

 

Proposed Requirements

For validation notices, collectors will be required to specify the date the debt collector will consider the end date of the validation period. The proposed rule makes clear the validation period begins on the date the debt collector provides the validation information and ends 30 days after the consumer receives, or is assumed to receive, the validation information.

For purposes of determining the end of the validation period, the debt collector may assume that a consumer receives the validation information on any date that is at least five days (excluding legal public holidays, Saturdays, and Sundays) after the debt collector provides it.

Debt itemization must include the Itemization Date. The Itemization Date may be one of four dates for which a debt collector can ascertain the amount of the debt: the last statement date, the charge off date, the last payment date, or the transaction date.

The debt itemization must also include specific information amount the debt including but not limited to the collector’s name and mailing address; the consumer’s name and mailing address; the merchant brand, if the debt is a credit card debt; or if it is a consumer financial product or service debt, the name of the creditor to whom the debt was owed on the itemization date; the account number; name of the current creditor; and an itemization of the current amount of the debt in a tabular format reflecting interest, fees, payments, and credits.

Tear-offs at the bottom of validation notices should allow consumers to respond in a variety of ways such as disputing account ownership, requesting validation of the debt or the name of the original creditor, and submitting payments.

 

Lingering Concerns

With some validation notices sent electronically and others mailed to locations with less frequent mail delivery, counting 35 days past the date that notices are sent could lead agencies to inadvertently reach out to consumers before the validation period has ended and deny them a full 30 days to respond.

Debt itemization, particularly the inclusion of exact dates, could pose problems for medical debt collectors due to the insurance payer billing process that precedes provider collections. Inclusion of interests, fees, and costs creates additional difficulties for collectors as well; they would prefer not to mention these additional charges if they don’t apply—or, in a disclaimer, explicitly state that they don’t apply—and be granted safe harbor from frivolous lawsuits.

The CFPB’s proposed tear-off has both consumer groups and collection agencies particularly concerned.

  • Both camps agree that checking a box at the bottom of the form is inadequate, and consumer groups fear tear-offs could confuse consumers who might misunderstand their rights or the time they have to dispute a debt (or worse, get reported to a credit reporting agency before they even realize a debt is in arrears).
  • Designing a compliant tear-off form could be a struggle. With all the consumer response options the CFPB proposes including, there’s little room on the page for required state law disclosures. In some states, agencies are prohibited from placing these disclosures on the reverse side of the form.
  • Most agencies fear their document readers will miss statements handwritten by the consumer and potentially miss important instructions provided by the consumer.

 

“One thing I find interesting about [the CFPB’s] request for validation is they’ve tried to take some liberties with rewriting the validation notice and the mini-Miranda and as I read the FDCPA, there is no required language or specific words that must be used; rather, they are concepts which must be conveyed. [ . . . ] 

I think there are different ways of expressing the same thought that don’t sound like you’re being handcuffed and thrown into a squad car and brought down to the station.”

Michael Kraft, General Counsel, CCS Companies

 

 

Agency Imperatives That Could Complicate Operations

The proposed CFPB rules could have a tremendous impact on ARM businesses, regardless of how they communicate with consumers. Fundamental change may be needed, at least in some respects, to manage compliance day to day.

 

Record retention in the digital era

Under the CFPB’s proposed rules, ARM agencies will need to retain evidence of compliance with the new rules starting on the date the collector begins collection activity on a debt until: 1) three years after the date of the collector’s last communication or attempted communication; or 2) three years after the date the debt is settled, discharged or transferred to the debt owner or to another debt collector.

Retaining three years’ worth of call recordings, letters, text messages, chats, and social media communications—often stored by date and time—could impose a significant burden.

 

Creditor/agency data sharing

Data standards are going to become increasingly important going forward. To be able to effectively manage communication preferences and consents, validation requirements, and consumer and account data, agencies will need to align more closely with creditors than they have in the past. 

 

 

Big Takeaway for ARM Agencies: For Now, ‘Consent Is King’

The CFPB has attempted to interpret compliance with the FDCPA in ways that protect the most vulnerable consumers without unduly burdening or impeding collection agencies. While there are opportunities for greater clarity and refinement within the proposed rules, the experts on the panel are generally pleased with the CFPB’s efforts to balance stakeholder concerns.

The CFPB is also open to safe harbors in certain areas to protect agencies from consumers’ unfair legal claims. The CFPB has reinstated commission letters, for example, thus giving collection agencies the ability to seek the CFPB’s interpretation of FDCPA regulations (which has the force and effect of law unless a court overturns it).

With this new roadmap from the CFPB, agencies may be more open to communicating in ways they’ve avoided in the past. And that’s a good thing for both businesses and consumers.

As we await (and help shape) the final CFPB rules, agencies must look to the letter of the FDCPA, E-Sign, and TCPA. They must prioritize consent and revocation management above all, and make their voices heard before the CFPB and Congress. No need to wait for final rules before adopting electronic communications; with the right systems and tools in place, you can boldly take your business in new directions.

 

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

An All-In-One Solution

What does it take to communicate with consumers on their terms, comply with changing rules, and keep operating costs low? Cloud-based contact management, fully integrated and automated, holds the key. Learn more about the all-in-one platform that can transform daily operations, customer service, and collection results.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

What the CFPB Rules Mean to You: An Expert Panel Weighs In – Part 1

What the CFPB Rules Mean to You: An Expert Panel Weighs In – Part 1

The recently proposed CFPB rules for debt collection have left many in the ARM market scrambling, or at least feeling anxious and uncertain about the future. But take heart: the CFPB recognizes your challenges and concerns. Overall, they’ve done a commendable job outlining limits and safeguards agencies must adopt to comply with the Fair Debt Collection Practices Act (FDCPA) in the digital era.

Even so, those 538 pages raise a fair number of questions. Many ARM leaders, legal experts, industry organizations, and business owners continue to weigh in on collection agencies’ behalf as we near the close of the comment period (September 18, 2019) for the Notice of Proposed Rulemaking (NPRM).

Recently, I sat down with two ARM industry leaders to discuss the NPRM for the CFPB’s proposed rules.

Joining me for the webinar were:

 

Moderating the panel was Mike Bevel, Director of Education for the Compliance Professionals Forum and an editor at insideARM.

Our discussion centered on four major areas addressed by the proposed CFPB rules: call caps, electronic communications, limited content messages, and validation notices/required disclosures. Here’s a brief recap of our discussion (you can access the free webinar recording here).

 

Call Caps

The prospect of call caps, as addressed in the CFPB’s proposed rules, is worrisome for many consumer advocates and ARM agencies. Both camps have expressed confusion and unease about how limits will be defined and applied going forward.

 

Proposed Requirements

Agencies can make up to seven calls per debt before reaching a consumer, including leaving voicemail messages. Once contact is made, only one call can be made per week (with some exceptions, including a consumer’s callback request or a consumer initiating a call). This rule would not supersede state law rules.

While attempting to connect with a consumer using any of the phone numbers on file, the debt collector may take advantage of the seven calls per week restriction on a per-debt basis only if the collector can prove the attempted contact was with respect to a particular debt rather than all the active accounts in its inventory.

 

Lingering Concerns

Agencies with more than one phone number for a consumer might struggle to reach him/her in a timely manner, fearing that dialing within the limits but on multiple accounts could still constitute harassment. In addition, the proposed rules don’t define a “connected call,” leaving debt collectors with more uncertainty.   

Consumers are concerned about the per-debt standard (versus per consumer); an individual with multiple accounts could receive dozens of calls per week. Even so, it’s reasonable to assume agencies would take more care in trying to reach these consumers, and consumers could simply reach out to agencies to put a stop to excessive calls.

Many agencies keep an individual consumer’s accounts completely separate from each other, as required by clients in the financial and healthcare arenas (e.g., credit card accounts, ambulance bill/hospital bill/medical specialist bill). When no one has an overall view of a consumer’s account statuses, building internal controls to ensure compliance and achieve the ideal call frequency could be a Herculean task.

 

Electronic Communications

Since the FDCPA was signed into law in 1977, new communication technologies have introduced new complications for third-party agencies looking to move beyond phone calls and printed letters. For the most part, the proposed CFPB rules regarding email and text messaging offer clear directives regarding consumer consent and consumer privacy.

 

Proposed Requirements

Many agencies shy from email and texting due in part to the risk of unintentionally disclosing consumer debts to third parties. This is a major concern for consumers as well. The CFPB addresses various scenarios related to selecting an email address or mobile number to use for consumer communications.

The proposed rules will provide debt collectors with protection from the unauthorized disclosure of a debt to a third party when engaging in email or text communications so long as specific procedures are maintained regarding the selection and use of a mobile number or email address. The protections afforded debt collectors when communicating with consumers using mobile numbers and email addresses vary depending upon whether the collector uses a number or address the consumer used to initiate communication with the collector; provides the consumer with 30 days’ notice of its intent to use a particular non-work mobile number or non-work email address to communicate with the consumer; or uses a non-work mobile number or non-work email address the consumer recently used to communicate with the creditor or a prior debt collector about the particular debt.

 

Lingering Concerns

When agencies use electronic communications, their responsibility doesn’t end when they hit “send.” They will need to monitor delivery of email and text messages carefully by way of notifications from communication providers. If emails bounce or links aren’t opened, legally required disclosures must be resent through a different channel.

The proposed CFPB rules would allow debt collectors to use digital delivery options for required notices such as the validation notice, verification information, or the name of the original creditor. Specifically, the required disclosures may be included in the body of an email or accessed via e a hyperlink that directs consumers to a secure website. Recognizing the risks associated with hyperlink usage and the reluctance on the part of consumers to click on hyperlinks, the proposed rules include conditions that must be met before using a hyperlink to provide a required disclosure.

Consumers fear the prospect of being flooded with emails and texts. They also fear that collection agencies will make it difficult for them to opt out. But these fears may be overblown. Aside from existing laws against harassment and abuse (and the fact that electronic communications are not cost free), agencies will be inclined to limit email use to avoid being shut down by their ISPs due to spam behavior.

 

“We take the position with most things that are consumer oriented, especially when it comes to electronic and alternative communication, that they have expressed a preference at some point that they be communicated with through some means, and to ignore the fact that they have . . . does a disservice to that consumer.”

Michael Kraft, General Counsel, CCS Companies

 

Limited Content Messages

For many years, collectors have been skittish about leaving messages for consumers who can’t be immediately reached. The CFPB has addressed this issue specifically, first by defining limited content messages as attempts to communicate for purposes of the frequency of calls requirements, while at the same time declaring a limited content message to not be a communication in connection with the collection of a debt as that term is defined in the FDCPA.

 

Proposed Requirements

Limited content messages can be relayed via voicemail, text, or live communication with a third party as long as the message contains the following:

  • The consumer’s name;
  • A request that the consumer respond to the message;
  • The name or names of one or more natural persons the consumer can contact;
  • A callback number; and
  • If the message is delivered electronically, a disclosure explaining how the consumer can stop receiving messages through that medium.

 

Limited content messages may not be delivered via email, as an email address would reveal the sender—thus rendering the email an actual communication per the FDCPA.

For prerecorded voicemail messages, agencies should review TCPA regulations and verify appropriate consent (as would be required for auto dialing cell phones).

 

Lingering Concerns

While collection agencies are bound to protect consumer privacy (and consumer groups see limited content messages as obvious debt collection attempts), consumers are increasingly demanding transparency from businesses upfront. They want to know who’s trying to reach them and why. These two imperatives are somewhat in conflict, and the CFPB has yet to find a way to ease the tension.

The CFPB’s proposed natural person requirement might pose problems for larger agencies whose call centers lack the ability to transfer calls to specific agents. One simple fix, if the CFPB sees fit to institute it, would be to require agencies to request that consumers call a particular department and speak to any available agent.

 

“Personally, I don’t find the message as proposed to be super useful to the consumer. I think it sounds shady. I’m not sure who would respond to it—just saying ‘Please call me; this is about an account.’ I think if collectors would simply say, ‘This is about a [specific company] account, at least the consumer . . . could make a more educated decision about whether or how to respond.”

Stephanie Eidelman, CEO, insideARM/iA Institute

 

Don’t Miss Part 2 of the Panel Discussion

In my follow-up post, I’ll cover the most important aspects of the CFPB’s proposed rules regarding validation notices/required disclosures. I’ll also share new business imperatives that could require fundamental change, along with the most important takeaway for ARM agencies.

Here on the OS blog, our goal is to provide important, timely insights and actionable tips you can use to minimize risk and improve business outcomes. If you haven’t already, be sure to register for the blog to receive valuable new content right in your inbox. As always, we’ll do our best to keep you informed and up to date.

 

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Ready to Text?

For a comprehensive guide to text messaging, check out our “Ready to Text?” eBook. In it, you’ll learn all the nuances, pitfalls, and timely developments you need to understand so you can connect with consumers on their terms. Download your free copy today.

Data Privacy and Security: What’s Next for Debt Collectors?

Data Privacy and Security: What’s Next for Debt Collectors?

Data privacy and data security are two very hot topics in the ARM industry today. The California Consumer Privacy Act (CCPA) is set to take effect in January 2020, with additional privacy bills now pending in at least 25 states. Meanwhile, cyber crimes involving...

ACA International Members Clamor for Text and Email

ACA International Members Clamor for Text and Email

Members of the trade group ACA International, the Association of Credit and Collection Professionals, have always placed compliance, training, and innovation as guide posts for their collection operations. This year is no exception.

During ACA’s recent convention and expo in San Diego, California, I joined David Kaminski, senior partner at the law firm Carlson & Messer LLP, to lead a standing-room-only session in which we detailed the “how to’s” of text messaging, email communications, chat, and E-Sign. Our goal was to translate complex compliance requirements into everyday, scalable contact management solutions.

During our session, we tried to help attendees understand not only how to build a robust digital communication program under current law, but also how the Consumer Financial Protection Bureau’s (CFPB) new proposed rules for debt collection will impact text and email communications.

As I mentioned during the session, one of the most significant road blocks debt collectors must overcome before implementing a digital communications program is compliance with the Electronic Signatures in Global Commerce Act (E-Sign).

Text Messaging Session: Key Takeaways

  • The Telephone Consumer Protection Act (TCPA) controls when and how a text message may be sent to a consumer’s mobile phone if sent using an automated platform.
  • The Fair Debt Collection Practices Act (FDCPA) and state law requirements impact text message programs offered by third-party debt collectors.
  • The Cellular Telephone and Internet Association (CTIA) controls the format and content of short-code text communications.
  • Text messages are deemed as calls, so days of week, times of day, and other calling restrictions DO apply to text communications.
    Texts require consumer consent.
  • Texts are communications under federal and state law.
  • Texts are not writings.
  • Disclosures and verbiage otherwise required in written communications need not be included in text message communications.
  • Character restrictions are challenging but not insurmountable.
  • Terms and conditions must be presented to and agreed upon by the consumer before engaging in a short code/key word text message self-service program.
  • Senders of text messages must track delivery rates, bounce backs, deactivated or ported numbers, and open rates for URLs.
  • The CFPB’s proposed rules for debt collection impose requirements for the format of the text, the inclusion of the creditor’s name, the identification of the account(s), and the information that may or may not be included in the body of the text.

Email Communication Session: Key Takeaways

  • The FDCPA and state law requirements impact email communications between third-party debt collectors and consumers.
  • Emails are writings.
  • Emails require consumer consent.
  • Emails are communications under federal and state law.
  • Emails are not calls, so days of week, times of day, and other calling restrictions DO NOT apply to email communications.
  • Disclosures and verbiage otherwise not required in text communications need not be included in email communications.
  • Information may be included within the body of an email without worry of character restrictions.
  • Senders of emails must track delivery rates, bounce backs, and open rates for URLs when communicating with consumers using email.
  • The CFPB’s proposed rules for debt collection impose requirements for the format of the email; rules for the to, from, and subject line of the email; the inclusion of the creditor’s name; the identification of the account(s); and the information that may or may not be included in the body of the email.

Chat Communication Session: Key Takeaways

  • Chat sessions are controlled by the TCPA, the FDCPA, and in some respects the CTIA depending upon the business model of the sender (creditor, EBO, or first- or third-party debt collector).
  • Chat sessions are a form of text messaging and are more akin to a writing than a call.
  • Chat sessions are initiated by the consumer.
  • Chat sessions are considered a customer service offering.
  • Chat sessions are communications under federal and state law.
  • Chat sessions create a transcript which a consumer may keep and access later.
  • Chat sessions should be introduced with the FDCPA Miranda warning if it is the first communication with the consumer (third-party debt collectors only) along with a statement explaining it is a single conversation with the consumer (as opposed to multiple texts to the consumer).
  • Chat sessions should be concluded with an explanation to the consumer that the company’s agent is leaving the chat session.
  • Like texts and emails, chat sessions can be scripted.

Electronic Signatures in Global and National Commerce Act (E-Sign) Disclosure: Key Takeaways

  • E-Sign is the law which allows digital records, authorizations, and disclosures otherwise required by law to be provided to the consumer in writing and delivered to the consumer electronically.
  • E-Sign is the law which allows digital signatures (sounds and symbols) to be applied to electronic records electronically.
  • E-Sign requires the business to provide the consumer with a statement of rights as a condition of granting their E-Sign consent to receive required written disclosures electronically.
  • E-Sign is recognized by the CFPB as a required step when delivering required disclosures electronically; specifically, the validation notice, the name of the original creditor, and responses to a consumer’s request for verification of the debt (see new rules section 1006.42).

Start Communicating Electronically with Confidence and Ease

To assist members of the ARM industry, healthcare providers, and federal and state governments with their digital communication programs, Ontario Systems provides on-site and video conference consulting services. Whether you need help with policies and procedures, text message scripts, email templates, training or technology implementation, or even role-based training, our Ontario Systems consulting team is here to help.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Ready to Text?

For a comprehensive guide to text messaging, check out our “Ready to Text?” eBook. In it, you’ll learn all the nuances, pitfalls, and timely developments you need to understand so you can connect with consumers on their terms. Download your free copy today.

Top 10 Elevator Conversations RE: CFPB’s Proposed New Rules for Debt Collection – Part 2

Top 10 Elevator Conversations RE: CFPB’s Proposed New Rules for Debt Collection – Part 2

As I write this, it has been three weeks to the day (5-28-19) since the CFPB released its proposed new rules for debt collection. After the initial frenzy of conversation, consumer groups and the debt collection industry have quietly retreated to their respective corners. As a watch dog over legislation, regulation and case law impacting the industry, I find their silence deafening. Both camps are assessing precisely how their world will change if the new rules, as proposed, become final without any significant change. In the meantime, let’s look at five more elevator conversations (if you missed the first five, check them out here) you can use to help your team digest 537 pages of information.

 

Elevator Conversation #6: “The Limited Content Message is not a communication, but it may be a call if you leave a voicemail.”

If you have any tenure in the collection industry, you know where you were on March 25, 2006, when the Southern District of New York decided FOTI v. NCO FINANCIAL SYS | 424 F.Supp.2d 643 (2006). In this case, the court made clear, a voice mail message left on a consumer’s answering machine is a communication in connection with the collection of a debt and must therefore include:

  • the meaningful identity of the debt collector 15 USC 1692 d (6); and
  • the disclosure the communication was from a debt collector See 15 USC 1692 e (11).

It is also the case which held the inclusion of such information in a voice mail message can establish a claim against a debt collector for the unauthorized disclosure of a debt to a third party.

Huh? Yes, that is the reaction every debt collector has had in response to this case and all the other hundreds like it for the past 13 years. To alleviate this catch 22, the CFPB has attempted to placate the industry and protect consumers from the unauthorized disclosure of a debt to a third party by handing us a “model message.”

The model message purports to be a safe harbor from liability when leaving a message with a consumer. It should include the following:

  • the consumer’s name;
  • a request the consumer reply to the message;
  • the name of names of one or more natural persons [NOT A BOT OR ARTIFICIAL VOICE OR IVR] the consumer can contact to reply to the debt collector;
  • a telephone number the consumer can use to reply; and
  • if applicable, the opt out notice for electronic communications provided in 1006.6(e).

Example: This is a message for Bob Andersen from Mary Smith. Please reply by contacting me at XXX-XXX-XXXX.

If you like, the CFPB will allow you to include a salutation, the date and time of the message; a generic statement that the message relates to an account; and the suggested dates and times for the consumer to reply to the message.

There are no restrictions on whether this may be a voice mail message or text message. But we do know it INCUDES a ringless voice mail message and that an email can never be used to leave a limited content message.
See 1006.2 (j) 1-2

 

Elevator Conversation #7: “I have a riddle for you today. What can never be an email, but will always be a call, even if the phone does not ring, unless it is sent by text?”

You got it! A limited content message is the answer. Under the proposed rules, if you use the model message as prescribed, the model message shall not be deemed a communication under the FDCPA and will therefore, NOT trigger the disclosure requirements of the FDCPA noted above. However, if you leave the model message on a person’s cell phone, VoIP or landline answering machine, the model message is a call for purposes of the call cap limit.

Surprisingly, if you send the model message as a text message, it is NOT a call for purposes of the call cap limit even though the TCPA tells us it is a call. Don’t try to make sense of these last two statements. For the time being, just memorize them. Perhaps more clarity will be provided in the final rules.
1006.14 (b)(2)

Oh, and before I forget, if you leave the model message, communicate, or attempt to communicate with a consumer electronically using a specific email address or telephone number for text messages or any other electronic medium, you must explain how the consumer may opt out of further electronic communications or attempt to communicate to that address or telephone number.
See 1006. (e)

 

Elevator Conversation #8: “The call cap rule is easy. Seven in seven or one in seven.”

The CFPB’s proposed rules restrict a debt collector from placing repeated or continuous telephone calls in connection with the collection of a debt with the intent to annoy. Call caps are limited per person per debt to:

  • No more than seven attempts to reach a particular person about a particular debt within seven consecutive days [includes busy signal, reaching a voice mail box and causing the phone to ring];or
  • No more than one telephone conversation with a person within a consecutive, seven-day period. The day of the conversation is day one of seven. The term conversation is not defined. My guess is if you can identify yourself in the slightest manner, even by caller ID, and the person hangs up… it’s a conversation. Hopefully the final rules will clarify the definition of a conversation.

There are a few exceptions to these rules. Telephone calls placed to a person do not count toward the frequency limits if:

  • they are made to respond to a request for information from such person;
  • they are made with such person’s prior consent given directly to the debt collector; or
  • the placed calls never connect or the calls are placed to the consumer’s attorney, a consumer reporting agency, the creditor, the creditor’s attorney or the debt collector’s attorney.

See 1006.14 (b)(14)(a) -(b) and 1006.6(d)

 

Elevator Conversation #9: “We send a Spanish language version of the validation notice because we can.”

Many of the consumers from whom we collect tell us they prefer to communicate with us in a language other than English. Under the new proposed rules, we know we can send the validation notice in any language other than English so long as the non-English version is completely and accurately translated, and we include it with an English language validation in the same communication. Fortunately, the CFPB will provide us with the accurate and complete Spanish language version of the validation notice. If the CFPB adds sample validation notices to its website for other languages, we may consider sending additional versions to our consumer populations.
See 1006.34 (e)

Remember, even if you send the consumer a Spanish/English validation notice accurately and completely translated, you must still comply with the new, proposed 1006.34 (d) disclosure. This section of the proposed rules requires us to inform the consumer they may request a Spanish-language translation of the validation notice. Specifically, the English version of the validation notice must include a statement, “Pongase en contacto con nosotros para solicitor una copia de este formulario en epanol,”(which means “Contact us to request a copy of the form in Spanish.”

 

Elevator Conversation #10: “Have you figured out how to send a validation notice and other required disclosures electronically? We have.”

It is not as difficult as it may seem to send your FDCPA disclosures electronically. To help you understand the requirements, you must understand one simple concept. You can only substitute delivery by U.S. First Class mail if the manner you use is reasonably expected to provide actual notice in a form the consumer may keep and access later.

In other words, you can’t email someone a validation notice to some goofy email address they never use, or you cannot text a URL link to a consumer if they have no idea what to do with a URL link, or worse yet, if the URL link doesn’t work or allow them to save and later access the document. Once you get on board with the benefits you will enjoy if the consumer receives the disclosure or validation notice you send electronically, then you will be able to more readily embrace the new requirements.

Also, the rules for electronic delivery do not apply to one’s verbal delivery of a required disclosure.
See 1006.42(a)

With the backdrop of actual notice/keep and access requirements, a debt collector may provide a validation notice within five days of the initial communication with the consumer or the disclosures regarding the name of the original creditor or the right to dispute and request verification of the debt within 30 days of receipt of the validation notice in one of three ways:

  • After Debt Collector Obtains E-Sign Act Consent – In accordance with section 101 (C ) of the Electronic Signatures in Global and National Commerce Act (ESIGN Act) (15 USC 7001 (C )) after the consumer provides affirmative consent directly to the debt collector.
  • After the Creditor or Prior Debt Collector Obtains E-Sign Act Consent – If the creditor or prior debt collector obtained ESIGN Act consent to use an email address or telephone number to text the consumer about the debt you are seeking to collect [doesn’t matter if they actually used the address or phone number to provide electronic disclosures].

If you use this option to secure consent to deliver required disclosures electronically, you must either place the disclosures in the body of an email sent to the address for ESIGN Act consent was obtained or include a clear and conspicuous hyperlink to the disclosure(s) located on a secure website. Remember, if you use a hyperlink, the link must be accessible for some reasonable period of time [I personally think a reasonable period of time should be interpreted to mean the latter of the date the debt is paid in full, settled in full, returned to the creditor or exhausted by operation of law … but that’s just my opinion.] The consumer must also be able to save or print from the web page. If you use a hyperlink process to display the disclosures, you must also provide the consumer with an opportunity to opt out of the hyperlink delivery and make sure the consumer has not opted out.

  • You include the Validation Notice in Body of Initial Communication – You may include the contents of the Validation Notice in the actual body of an email if you:
    • treat the delivery of the email as a writing [not a verbal validation notice];
    • obtain ESIGN consent to deliver the required disclosure from the consumer and use one of two different email addresses:
      • the email address the creditor or the prior debt collector could have used for delivery of electronic disclosures under ESIGN Act regarding that debt; or
      • an email address you obtained using the reasonable procedures process detailed in 1006.6(d)(3).

 

These elevator conversations do not cover all the provisions of the new proposed rules, nor are they intended as such. In upcoming blog articles, watch for my work flow recommendations regarding text and email communications for both ordinary collection activities and extraordinary collection activities.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

Top 10 Elevator Conversations RE: CFPB’s Proposed New Rules for Debt Collection – Part 1

Top 10 Elevator Conversations RE: CFPB’s Proposed New Rules for Debt Collection – Part 1

It is hard for anyone to get their head around the Consumer Financial Protection Bureau’s proposed new rules for debt collection. The document is an exhausting 537 pages long, filled with cross references, mired in statutory definitions, and extremely challenging to navigate. Honestly, after I finished my first reading of the new rules, I was convinced I would never master their complexity. I am happy to say, after two weeks of study, I was able to distill the proposed rules into 10 elevator conversations. These five conversations are the first of my two-part blog series.

 

Elevator Conversation #1: “The Bureau’s proposed rules have been a long time coming.”

It’s a very long process. It all started in 2010, when Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. This law made the Bureau the first agency with the power to issue substantive rules under the 1977 Fair Debt Collection Practices Act (FDCPA). The Bureau announced its notice of proposed rulemaking for the FDCPA on November 6, 2013. On Tuesday May 7, 2019, almost six years later, the Bureau released the proposed rules for the FDCPA.

The next step in the rulemaking process requires the Bureau to publish these proposed rules in an official Federal government publication called the Federal Register. After they are published in the Federal Register, industry and consumers alike will have a 90-day period to file comments. At that point the Bureau will take the comments under advisement toward eventually promulgating the final rules. As of the date of this writing, we anticipate the proposed rules will be published this week.

 

Elevator Conversation #2: “I wonder if debt collectors can be sued for noncompliance with the new rules.”

My lawyer told me once the new rules take effect – most likely a year after the final rules are published in the Federal register – they will have the force and effect of law. Rules are the same thing as regulations. When a governmental body such as the Bureau goes through this elongated rulemaking process, its final rules will apply to all third-party debt collectors. This means consumer attorneys and their clients will be able to sue third-party debt collectors for failing to follow the new rules. Similarly, the Bureau and state attorneys general will be able to issue civil investigative demands and launch enforcement actions against third-party debt collectors for noncompliance.

 

Elevator Conversation #3: “I can live with the call caps because they don’t apply to text messaging.”

Under the new rules, third-party debt collectors will be able to place up to seven calls in seven days to a particular person regarding a particular debt. However, any number of calls placed in excess of that limitation will be considered harassing, oppressive or abusive behavior under the FDCPA and an abusive practice under section 1031 of the Dodd-Frank Act. Such limits do not impact text message communications even though text messages are defined as calls under the Telephone Consumer Protection Act.

Nor may debt collectors place a call to a person within a period of seven consecutive days after having a telephone conversation with the person in connection with the collection of such debt. The date of the telephone conversation is the first day of the seven-consecutive-day period. Third-party debt collectors can exceed these limits if responding to a request for information from the person, or if such person’s prior consent is given directly to the debt collector.
See 1006.14(b)(2) – Frequency Limits at page 459.

 

Elevator Conversation #4: “It is nice to see some clarity around email and text message communications.”

I know we did not need the Bureau to tell us we could communicate electronically with consumers, but it is nice to see the clarification around compliance with the Electronic Signatures in Global Commerce Act (ESIGN). Personally, I am not wasting any more time fighting ESIGN. At our agency, we already provide the disclosures to our consumers, ask for their consent to deliver legally-required written notices and disclosures to them as required by ESIGN [see sidebar], ask them to show us their nonwork email address or nonwork mobile number is an active address or number they can access, and then just move on.

The new rules just give us more options and make this ESIGN process easier. Under the new rules, as proposed, we will have a bona fide error defense against unauthorized third-party disclosure of the debt if we have procedures that confirm we communicate with the consumer using:

  • An email address or mobile number the consumer recently used to contact us other than to opt out;
  • A nonwork email address or nonwork mobile phone number either our agency or the creditor for the particular debt told them we would use to communicate with them about the debt. Note: such notice must be provided clearly and conspicuously either verbally or in writing and must be provided at least 30 or fewer days before using. The opt out specified in the notice has not expired [other restrictions apply]; or
  • A nonwork email address or nonwork mobile phone number either the creditor or a prior debt collector obtained from the consumer to communicate about the debt and used before the debt was placed with our agency.
    See 1006.6(d)(3) at pages 455-456 – Reasonable procedures for email and text message communications.

 

Elevator Conversation #5: “We have already cut our postage and letter expense in half by adopting a voluntary email or text message program for our consumers.”

No need to wait for these new rules to take effect. We have two categories of letter communications. The first is called Ordinary Collection Actions and the second is Legally Required Collection Actions. The former is composed of requests for payment, payment reminders, receipts, settlement documents, and standard collection notices requesting payment. The latter is composed of the G notice or validation notice which we must provide in the first communication with the consumer or within five days of our first communication with the consumer, the intent to deposit notice, the name of the original creditor notice and the verification information we send if the consumer disputes the debt within 30 days of receiving the notice.

We simply follow the reasonable procedures steps for electronic communications when sending information relating to Ordinary Collection Actions [see above] and follow ESIGN when we engage in Legally Required Collection Actions by sending information which the law requires us to provide in writing.

Next week … more about ESIGN and how you can use it for the validation notice, collecting decedent debt, new notice requirements for credit reporting, document retention requirements, the limited content message, the model form and more. Send your questions about the new proposed rules to me at rozanne.andersen@ontariosystems.com, Angela Erwin at angela.erwin@ontariosystems.com, or Sara Woggerman at sara.woggerman@ontariosytems.com.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

 

ESIGN in Action

 

The ESIGN SEC. 101. (c) CONSUMER DISCLOSURES provision explains the information you must provide the consumer to secure ESIGN consent. I’ve included the requirements for your reference at the end of this blog. To give you an idea of a script you and your attorney can edit to solicit the consumer’s ESIGN consent, I provide the following:

Collector: Hi Amy, I’m glad we could set up the preauthorized electronic funds transfer payments. But before we can send you your [FDCPA required] post-dated payment intent to deposit reminders pursuant to 15 USC 1692f (2) by email/text, I have to make sure you will be able to receive the information we send and understand your right. Do you mind listening for a few seconds?

Amy: No, I don’t mind listening.

Collector: Great. Sometimes the kinds of documents that we must send you require us to obtain your consent to send them electronically.
Granting consent to receive this information electronically applies to the following debt or debts (list debt(s)).

You can withdraw this consent at any time by calling us at xxx-xxx-xxxx and we will mail you the required information in the future. (Include a statement here that describes if the agency will charge or not charge a fee for obtaining this information in a paper form.)

To ensure we always have your proper email address, you can update your contact information by calling us*, visiting our website* or sending us an email*. (An agency could do this via text if the agency has this capability; texting laws will apply.)

The hardware and software requirements to access and obtain records are (… – example: you are required to have Adobe Acrobat).
To confirm that you can receive the information electronically I am going to send you an email.

Please reply to me so I know this is a good address for you.
(Note: if you disclose the information via web, the consumer must confirm their ability to use the web; if you disclose the information via email, they must confirm their ability to use that email address; if you disclose the information using text, they must confirm their ability to use that mobile number for texts.)

Amy: OK, I received your email and sent a reply to you.

Collector: Great. Got it. We are good to go. Remember, if you have any questions for me at any time about anything we have discussed, you may call our office Monday through Saturday between the hours of 8 a.m. Central and 6 p.m. Central.

 

“Too Good to be True” – Unfortunately, it’s the Case with the FCC’s New Reassigned Number Database

“Too Good to be True” – Unfortunately, it’s the Case with the FCC’s New Reassigned Number Database

If you are like me, you cheered when you read the Federal Communications Commission (FCC) is coming out with a reassigned mobile phone number database. Visions of daily scrubs against a free public database of mobile phone numbers supported by carriers across the land, danced in my head. But alas, such is not the case. Although the new database will have tremendous value, it is value that will come with a price.

Why We Should Care

If there is one thing we know for sure about the Telephone Consumer Protection Act (TCPA), particularly in the wake of ACA vs. FCC, it is the sad truth the “one free call” rule no longer exists. This means without exception, and until further clarification is provided, in order to comply with the consent requirements of the TCPA when autodialing, text messaging, leaving a prerecorded message or using an artificial voice to contact a consumer via their mobile phone, callers using mobile numbers must in fact contact only those consumers from whom they have express consent. There is no room for error.

The FCC’s Solution

According to the FCC, each year, over 35 million numbers in the U.S. are disconnected and become available for reassignment to new subscribers. Few disagree the failure to promptly identify these reassignments poses significant issues for the calling parties who will inevitably call a person to whom the number has been reassigned, but who did not grant consent. Recognizing callers must have confidence the number they are using is associated with the consumer who actually granted the consent, the FCC embarked on a two-year study of the reassigned number dilemma.

In December of 2018, the FCC approved the roll out of a mobile phone database of deactivated phone numbers. For those who are unfamiliar with the term “deactivated;” the term means turned off or disabled. In this context, a carrier turns off or deactivates a mobile phone number when, for example, a person relinquishes their phone number to their carrier to take advantage of a discount. When this happens, the carrier will categorize your old number as deactivated and reassign the number to a new consumer.

Mandatory Participation by Voice Service Providers

While several private companies in the marketplace can confirm numbers as being currently assigned to a particular person, the FCC observed these commercial databases do not contain information on every mobile phone number. This is because currently voice service providers who assign numbers to their subscribers are not required to report this information to a centralized database. In contrast, the FCC’s new, mandatory, data reporting obligation will be imposed on all carriers and voice providers, including wireless, wireline, and interconnected VoIP providers who obtain numbering resources from the North American Numbering Plan Administrator (NANPA).

How it Works

Voice service providers will need to report deactivated mobile phone numbers to the database administrator each month. They will also have to establish a minimum “aging” period of 45 days after permanent disconnection. After waiting 45 days, the number is eligible for reassignment. The FCC stated that a minimum aging period longer than a month would permit permanent disconnections to be reflected in the new database as providers report this information to the database administrator monthly.

Access to the database will be available to callers large and small. Low-volume access will be available through a website interface. High-volume access will be made available for batch processing through standardized interfaces. The Order also recognized that callers may want to use third-party contractors as their agents, and the FCC will allow third-party contractors access to the database on request.

Not a Panacea

Callers will pay a fee for access to the database. Yet it is too soon to predict the cost of access via the web interface or batch processing. Issues regarding the security of the database and the management of the high volume of transactions could cripple the database even before it even launches. While the FCC estimates the build out of the database will take a year, many expect it could take as long as two. In the meantime, callers are well advised to use commercial scrub services to increase their likelihood of contacting consumers for which they have obtained consent using their mobile phone numbers.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

5 E-Sign Myths Dispelled – Must-Know Requirements for a Paperless, Stamp-Free Collections Process

5 E-Sign Myths Dispelled – Must-Know Requirements for a Paperless, Stamp-Free Collections Process

As most of you know, I talk with members of our industry almost daily about their compliance concerns. One topic that comes up regularly is E-Sign – it’s just something people have a hard time understanding. Frankly, if your agency has no plans to text or email consumers, then I suppose there is no reason for you to understand all the intricacies of E-Sign. But if you do plan to use these forms of digital communication to send letters and notices to consumers, you MUST nail the E-Sign requirements.

Here are five common misconceptions that I run into regularly when talking with clients:

 

Myth No. 1 – E-Sign means Email signatures.

This may come as a shock, but E-Sign does not mean email, Reg E or electronic signatures. E-Sign is the acronym for the Electronic Signatures in Global and National Commerce Act (E-Sign) (Pub.L. 106–229, 114 Stat. 464, 15 U.S.C. ch. 96). Enacted June 30, 2000, this long-awaited Federal law, legitimized electronic documents and created a process for electronic signatures by ensuring the validity and legal effect of contracts entered into electronically. For those of you who are really into E-Sign, you can celebrate National E-Sign Day every year on June 30.

 
Myth No. 2 – State Laws Override E-Sign.

Although every state has at least one law pertaining to electronic signatures, it is the federal law that lays out the guidelines for interstate commerce. The general intent of the E-Sign Act is spelled out in the very first section (101.a), that a contract or signature “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” This simple statement provides that electronic signatures and records are just as good as their paper equivalents, and therefore subject to the same legal scrutiny of authenticity that applies to paper documents.

 

Myth No. 3 – If I have the consumer’s consent to email, I have E-Sign consent.

Huge no. There is a very important provision in the E-Sign Act which is often overlooked. It pertains to the type of consent you need to obtain if you intend to substitute the delivery of a legally required written notice or document to the consumer using an electronic form such as email or text.

 

Myth No. 4 – I need E-Sign consent to send a consumer an email.

Sorry. Wrong again. You need E-Sign consent to substitute a wet pen and ink signature for a digital signature or to substitute the electronic delivery of a legally required written notice or document for delivery by first-class mail.

 

Myth No. 5 – Rather than messing with the consent, I will just tell the consumer they can opt out.

Now we are in dangerous territory. I remind people we can never say the two words “opt” and “out” together in a sentence when we are talking about E-Sign. This is because you cannot ask consumers to opt out of something they never gave, and you never had. You have an affirmative duty to provide consumers with an explanation of their rights before you can ask them for consent to provide them legally required written disclosures, notices and documents electronically. 

 

Determining When E-Sign Consent is Required

E-Sign makes clear, when it comes to the delivery of a disclosure, notice or document that is required by law to be provided in writing, you can only do so if the consumer agrees to this form of delivery after you have provided them a reading of their rights. Think of it in these terms. If a police officer questions a suspect in custody without first reading this person their Miranda rights, any statement made is presumed to be involuntary, and cannot be used against the suspect. It’s the same with E-Sign. If you want to send legally required disclosures, notices and documents to a consumer that are required by law to be provided in writing; you need to read the consumer his rights and then ask them for consent. 

The consumer must provide affirmative consent, meaning that it cannot be assumed that a consumer has given consent simply because he/she has not chosen the option to deny consent, or has not responded to an option to grant consent.

 

Consumer Disclosure

E-Sign SEC. 101. (c) CONSUMER DISCLOSURES explains the information you must provide the consumer to secure E-Sign consent [i]. I’ve included the requirements for your reference at the end of this blog. To give you an idea of a script you and your attorney can edit to solicit the consumer’s E-Sign consent, I provide the following:   

Collector: Hi Amy, I’m glad we could set up the preauthorized electronic funds transfer payments. But before we can send you your post-dated payment reminders by email/text I have to make sure you will be able to receive the information we send and understand your right. Do you mind listening for a few seconds?

Amy: Yes, that’s OK.

Collector: Great. Sometimes the kinds of documents that we must send you require us to obtain your consent to send them electronically. 

Granting consent to receive this information electronically applies to the following debt or debts (list debt(s)). 

You can withdraw this consent at any time by calling us at xxx-xxx-xxxx and we will mail you the required information in the future.  (Include a statement here that describes if the agency will charge or not charge a fee for obtaining this information in a paper form) 

To ensure we always have your proper email address, you can update your contact information by calling us*, visiting our website* or sending us an email*.  (An agency could do this via text if the agency has this ability, texting laws will apply.)

The hardware and software requirements to access and obtain records are … (example: you are required to have Adobe Acrobat).  

To confirm that you can receive the information electronically I am going to send you an email.

Please reply to me so I know this is a good address for you.

(Note: if you disclose the information via web, the consumer must confirm their ability to use the web; if you disclose the information via email, they must confirm their ability to use that email address; if you disclose the information using text, they must confirm their ability to use text.)

Amy: OK, I received your email and sent a reply to you.

Collector: Great. Got it. We are good to go. Remember, if you have any questions for me at any time about any thing we have discussed you may call our office Monday through Saturday between the hours of 8:00 a.m. Central and 6:00 p.m. Central.

 

More to Come

In my next blog I will provide you with examples of disclosures, notices and documents that may trigger E-Sign. Keep in mind, one of the leading organizations in our space representing collection agencies has formally requested the CFPB to provide an exemption from E-Sign. Only time will tell. In the meantime, a prudent course of action would be to embrace E-Sign, use it to your advantage and throw your stamps away.

 

Words of Advice

Please read the case Lavallee vs. Med – 1. This case is on appeal in the 7th Circuit. The CFPB filed an Amicus Curia brief which clearly explains how and when E-Sign can be used in a debt collection environment. 

 

[i] E-sign SEC. 101. (c) 1) CONSENT TO ELECTRONIC RECORDS. —Notwithstanding subsection (a), if a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing, the use

of an electronic record to provide or make available (whichever PUBLIC LAW 106-229-JUNE 30, 2000 114 STAT. 465 is required) such information satisfies the requirement that such information be in writing if—

(A) the consumer has affirmatively consented to such use and has not withdrawn such consent;

(B) the consumer, prior to consenting, is provided with a clear and conspicuous statement—

(i) informing the consumer of (I) any right or option of the consumer to have the record provided or made available on paper or in nonelectronic form, and (II) the right of the consumer to withdraw the consent to have the record provided or made available in an electronic form and of any conditions, consequences (which may include termination of the parties’ relationship), or fees in the event of such withdrawal; (ii) informing the consumer of whether the consent applies (I) only to the particular transaction which gave rise to the obligation to provide the record, or (II) to identified categories of records that may be provided or made available during the course of the parties’ relationship; (iii) describing the procedures the consumer must use to withdraw consent as provided in clause (i) and to update information needed to contact the consumer electronically; and (iv) informing the consumer (I) how, after the consent, the consumer may, upon request, obtain a paper copy of an electronic record, and (II) whether any fee will be charged for such copy; (C) the consumer— (i) prior to consenting, is provided with a statement of the hardware and software requirements for access to and retention of the electronic records; and (ii) consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent; and (D) after the consent of a consumer in accordance with subparagraph (A), if a change in the hardware or software requirements needed to access or retain electronic records creates a material risk that the consumer will not be able to access or retain a subsequent electronic record that was the subject of the consent, the person providing the electronic record— (i) provides the consumer with a statement of (I) the revised hardware and software requirements for access to and retention of the electronic records, and (II) the right to withdraw consent without the imposition of any fees for such withdrawal and without the imposition of any condition or consequence that was not disclosed under subparagraph (B)(i); and (ii) again complies with subparagraph (C).

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

An Inconvenient Truth About Convenience Fees

An Inconvenient Truth About Convenience Fees

The typical convenience fee conversation between a third-party collection agency client and its legal counsel usually begins like this:

Third-party agency client: Can I legally charge a convenience fee or not?
Attorney: It’s complicated.
Third-party agency client: I’m not paying you to tell me it’s complicated.
Attorney: Let’s talk.

 

The terms convenience fee, processing fee, administrative fee and payment fee all refer to a charge to the consumer for making a certain type of payment. Such a fee is most commonly associated with a debit card or credit card payment but can also be used to describe a bank account transfer or even a paper pay-by-phone check. For purposes of this article, the term “convenience fee” will be used in connection with a charge to the consumer for initiating or authorizing a credit card or debit card payment transaction. This article does not address state surcharge or cash discount laws.

The ability to charge fees associated with credit card and debit card transactions is regulated by VISA MasterCard Rules and the specific rules of each card company as outlined in the merchant agreement. The ability for third-party debt collectors to charge fees associated with credit card and debit card transactions is regulated by state laws, the Fair Debt Collection Practices Act (FDCPA) and consent orders and Guidance Bulletins published by the Consumer Financial Protection Bureau (CFPB).

This workflow analysis focuses on the charging of convenience fees in connection of the collection of debt as that term is defined in the FDCPA. There are two important provisions in the FDCPA governing convenience fees. The first explains the types of debts that trigger convenience fee issues and the second explains the prohibited convenience fee practice.

  • Fair Debt Collection Practices Act 15 U.S. Code § 1692a – Definitions Debt. As used in this subchapter …
    •  (5) The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.

  • Fair Debt Collection Practices Act 15 U.S. Code § 1692f – Definitions Unfair practices. As used in this subchapter …
    • A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

      (1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.

 

At this point, the convenience fee conversation between a third-party collection agency client and its legal counsel can go south:

Third-party agency client: How am I supposed to know whether the agreement between the consumer and my clients permits convenience fees?
Attorney: It’s your job to know if you want to charge a convenience fee.
Third-party agency client: What about that state law thing you mentioned, “if permitted by state law?” Which states permit convenience fees?
Attorney: It’s complicated.

 

Not surprisingly, agencies that charge consumers convenience fees for paying by credit card or debt card are engaging in one of the most high-risk practices associated with debt collection. The law is murky. Mistakes give rise to huge class action lawsuits. Most states prohibit them, a few are silent, and fewer still, permit them. Worse yet, consumer attorneys actively troll for such law violations.

So, what is the easy answer? Agencies lacking a clear legal basis to charge consumers a convenience fee should not charge consumers a convenience fee. But wait, there’s more. What if another party charged the consumers a convenience fee?

The following scenarios drive home the difference between the workflow triggered when the third-party debt collector charges the convenience fee to the consumer, and the workflow triggered when an independent payment processor charges the convenience fee to the consumer.

 

Scenario I – Workflow for Direct Charge 

Third-Party Debt Collector Charges the Convenience Fee:

  • Determine if the card rules governing the use of the card, permit, restrict or prohibit the charging of convenience fees for any reason and identify whether such reasons apply to the collection agency.
  • Determine if the original credit agreement between the creditor and the consumer permits the collection agency to charge the consumer a convenience fee directly.
  • If the collection agency is permitted to charge the convenience fee directly, determine if any state law prohibits the collection agency from charging the consumer a convenience fee directly.
  • If state law does not prohibit the collection agency from charging the consumer a convenience fee directly, present the consumer with an option to pay that does not include any sort of convenience fee charge. Present this option before the consumer agrees to any other form of payment having a convenience fee charge associated with it.
  • The requirement to present the free option must be addressed regardless of the form of interaction with the consumer. This means the free option and the requirement to present the free option before the consumer agrees to any other form of payment having a convenience fee associated with it, applies to web sites, payment portals, IVR scripts, live interaction, text messages, emails and all other forms of written and verbal communications.
  • The amount of the payment and the amount of the convenience fee should both appear on the consumer’s monthly credit card or debit card statement as separate items charged to the collection agency.*
  • Disclose the convenience to the consumer prior to completing the transaction so they can cancel the transaction.
  • Charge only a flat fee regardless of the transaction amount. The fee cannot be a percentage of the transaction [apart from government debt and approved government merchants].
  • Be aware, many card agreements prohibit anyone from charging a fee on recurring payments.
  • Charge the same convenience fee for all card brands and payment types that have a convenience fee associated with their use.
  • When processing the payment, the collection agency will advise the processor of both charges.
  • Be sure to retain a copy, or access to a copy, of the consumer agreement and any voice, web or digital record should the convenience fee charge be challenged and retain the copy according to the agency’s document retention policy.
    *Please note: Some card agreements require the convenience fee and the payment amount to appear as a single charge by the collection agency. For this reason, a general statement cannot be made which applies to all card agreements.

 

Scenario II – Workflow for Indirect Charge

Independent Payment Processor Charges the Convenience Fee:

  • Determine if the card rules governing use of the card, permit, restrict or prohibit the charging of convenience fees for any reason and identify whether such reasons apply to the scenario where the collection agency will select an independent payment processor that will charge the fee to the consumer.
  • If the creditor permits the collection agency to select an independent payment processor that will charge the consumer a convenience fee, determine if any state law prohibits the collection agency from presenting this payment option to the consumer.
  • Identify an independent payment processor that will charge the consumer to process payments.
  • Present the consumer with an option to pay that does not include any sort of convenience fee charge. Present this option before the consumer agrees to any other form of payment having a convenience fee charge associated with it.
  • The requirement to present the free option must be addressed regardless of the form of interaction with the consumer. This means the free option and the requirement to present the free option before the consumer agrees to any other form of payment having a convenience fee associated with it applies to websites, payment portals, IVR scripts, live interaction, text messages, emails and all other forms of written and verbal communications.
  • If the consumer chooses to pay using a method having a convenience fee associated with it, direct the consumer to the independent payment processor.
  • This hand-off to the independent payment processor can take place via website, payment portal, IVR script, live interaction, text message, email and any other form of written and verbal communication.
  • The collection agency will record and track the amount of the payment in its application. No record of any fee charged by a third-party processor will be retained by the collection agency.
  • Disclose the convenience fee option to the customer prior to completing the transaction so they can cancel the transaction.
  • The independent payment processor may only charge a flat fee regardless of the transaction amount. The fee cannot be a percentage of the transaction [apart from government debt and approved government merchants].
  • Be aware, many card agreements prohibit anyone from charging a fee on recurring payments.
  • The amount of the payment and the amount of the convenience fee should each appear on the consumer’s monthly credit card or debit card statement [e.g. Visa, MasterCard, etc.] as separate items. As a practical matter, the payment will show as having been charged to the collection agency and the convenience fee will show as having been charged to the independent payment processor on the consumer’s statement.

 

Consultation with independent legal counsel is a necessary step to the convenience fee decision. An appreciation for the distinction between a fee charged directly by a third-party collection agency and a fee charged by the payment processor is equally important. Focus on the consumer’s experience, make sure your scripts, documentation, records and disclosures clearly support the method you settle on using. Don’t blur the lines and remember to exercise due diligence when choosing your payment processors.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

Crunch has Finally Left its “Marks” – 9th Circuit ATDS Decision Stands

Crunch has Finally Left its “Marks” – 9th Circuit ATDS Decision Stands

If you are like me, your inbox is being inundated with blogs and articles on the recent, bombshell development in the case of Marks v. Crunch San Diego, LLC, 904 F.3d 1041 (9th Cir. Sept. 20, 2018) (“Marks”). Some of the finest lawyers in the country are churning out their analysis, breaking down the procedural history and dissecting the Court’s opinion with the best of intentions; but what does it all mean? To help readers understand how Marks impacts their contact management strategy, consider the following takeaways:

1 – The Issue: In Marks, the question for the District Court was whether the defendant’s web-based marketing platform used to send promotional text messages to a list of stored telephone numbers was an automated telephone dialing system (ATDS) as that term is defined by the Telephone Consumer Protection Act (TCPA).

2 – Statutory Definition: To answer the question, the District Court examined the definition of ATDS as presented in the TCPA: “[E]quipment 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.” 47 U.S.C. § 227(A)(1).

3 – District Court’s Interpretation of ATDS: In the opinion of the District Court, to meet the TCPA’s definition of an ATDS, the device must include a random or sequential number generator to store or produce numbers to be called. Since Crunch established its text platform did not have a random or sequential number generator, the Court ruled in the defendant’s favor. This was good news.

4 – Plaintiffs’ Appeal: Not surprisingly, the plaintiffs in this class action did not take kindly to the District Court’s decision and appealed to the wisdom of the 9th Circuit Court of Appeals. The plaintiffs argued the statute supports two definitions of an ATDS – one which supports the Court’s very narrow interpretation of an ATDS (i.e. a device with the capacity to generate random or sequential numbers and dial such numbers) and a second which includes a device that stores numbers to be called and dials such numbers. The 9th Circuit agreed. This was bad news – at least for the industry.

5 – 9th Circuit Rules for Plaintiffs: In contrast to the District Court’s interpretation, the 9th Circuit broadly interpreted the TCPA’s definition of ATDS to include devices with the capacity to dial stored numbers automatically. The 9th Circuit found that “the statutory definition of ATDS includes a device that stores telephone numbers to be called, whether or not those numbers have been generated by a random or sequential number generator.” Id. at 1043.

6 – Defendant Files for Supreme Court Review: Equally disgruntled, on January 28, 2019, Crunch San Diego, LLC, as petitioner, filed a petition for a writ of certiorari with the U.S. Supreme Court, asking the Court to review the 9th Circuit decision.

7 – Parties Settle: Shockingly, before the U.S. Supreme Court decided whether it would take the case on certiorari review, the parties settled. This was more bad news. This means the 9th Circuit’s broad interpretation of ATDS stands!

8 – 9th Circuit’s Decision Stands: The 9th Circuit has appellate jurisdiction over the district courts in the following districts: District of Alaska, District of Arizona, Central, Eastern, Northern and Southern Districts of California; District of Hawaii. The 9th Circuit’s decision in favor of the plaintiffs stands as the law of the land for these districts.

9 – Two Definitions of ATDS: This means the most prudent course of action for anyone dialing consumers located in the any one of these states using a device that stores telephone numbers to be called and automatically dials such numbers is to realize they are using an ATDS as that term is defined by the TCPA. 

10 – Sage Advice (but not legal advice):  Stay the course. Be proactive. Comply with Crunch even if when you are autodialing, texting, or leaving prerecorded messages on the mobile phones of consumers who live outside of the 9th.

  • Seek independent legal advice to ensure your policies, procedures and processes support compliance with Crunch.
  • Obtain and record the consumer’s consent before autodialing, texting, or leaving prerecorded messages on mobile phones.
  • Receive and record the consumer’s revocation of consent before autodialing, texting, or leaving prerecorded messages on mobile phones.
  • Treat any device which stores a list of numbers and dials such numbers to be an ATDS.
  • Do not assume a device which lacks the ability to generate random or sequential numbers is not an ATDS.
  • Dial responsibly. When in doubt, use your manual contact system.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.