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When I was a law student, I would never have guessed the reason I needed to understand constitutional law was so I could someday explain it to nonlawyers who place collection calls.

But today, in the wake of a major legal decision, I’m here to do just that.

As readers might recall, during the waning hours of the 114th Congress—in the proverbial back room of the Senate’s Chambers—Congress passed, and President Obama signed, the Bipartisan Budget Act. Buried in this Act, between an amendment to the Federal Crop Insurance Act and a change to the Petroleum Reserve Strategy, was a quiet amendment to the Telephone Consumer Protection Act (TCPA). The amendment established an exemption from the TCPA when collecting debt owed to or guaranteed by the Federal government.

For most third-party debt collectors, the amendment was a nonevent. But for those who collected Federal government–backed student loans and other Federal government debt, it was a cash cow—until the matter of Barr, Attorney General, Et Al. V. American Association Of Political Consultants, Inc., Et Al. Certiorari To The United States Court Of Appeals For The Fourth Circuit No. 19–631 reared its ugly head.

 

SCOTUS Strikes Down the Federal TCPA Exemption

The case was argued May 6, 2020. On July 6, the United States Supreme Court affirmed in favor of the U.S. Office of the Attorney General, holding that the 2015 Federal government exemption from the TCPA was unconstitutional.

The original petitioners in the case—namely the American Association of Political Consultants and three other organizations that participate in the political system—filed a declaratory judgment action, claiming that §227(b)(1)(A)(iii) violated the First Amendment. The petitioners were basically jealous [my word] of the TCPA exemption Congress granted persons who collected debt owed to the Federal government; the petitioners wanted to make robocalls, too.

In seeking a declaratory ruling, the petitioners were hoping the district court would: 1) agree the Federal government debt exemption from the TCPA violated the free speech clause of the U.S. constitution; and 2) declare the entire prohibition against robocalling unconstitutional. As a result, the petitioners and other callers would be free to make robocalls.

Unfortunately for the petitioners, the district court did not rule as they had hoped. Rather, the court determined that although the robocall restriction with the government debt exemption was content- based and therefore in violation of the constitution, it would withstand constitutional scrutiny because the of the overarching need to collect Federal government debt.

On appeal, the Fourth Circuit vacated the judgment, agreeing that the robocall restriction with the government debt exception was a content-based speech restriction but holding that the law could not withstand strict scrutiny. The court invalidated the government debt exception, applying traditional severability principles to sever it from the robocall restriction.

In other words, by not striking the TCPA’s entire prohibition against robocalling as unconstitutional, the Fourth Circuit did not go as far as the petitioners would have liked.

Upon Certiorari, the United States Supreme Court affirmed the judgment of the Fourth Circuit.

 

What Does This Decision Mean for You?

Now that the TCPA applies to all third-party collectors equally, here are four things you should bear in mind if you collect government debt.

 

1. Stay the course and obtain consent

As required by the TCPA, you must first obtain the consumer’s consent if you:

  • Place calls or texts using an automatic telephone dialing system to a mobile phone;
  • Leave prerecorded messages on a mobile phone; or
  • Use an artificial voice to contact consumers on their mobile phone.

 

2. Federal government debt is no longer expressly exempt

If you collect on behalf of a state or local government or the Federal government, you must comply with the TCPA. This is because the TCPA applies to any Person. Person is defined as an individual, partnership, association, joint-stock company, trust, or corporation.

 

3. Governments might be able to skirt the TCPA

The TCPA’s prohibition against robocalls, robo texts, prerecorded messages, and use of an artificial voice to place calls to a mobile phone only applies to a Person as that term is defined. Federal, state, and local government bodies could possibly avoid TCPA compliance by arguing they are not a Person as defined by the Act.

 

4. TCPA restrictions on speech do not violate the free speech clause of the U.S. Constitution

At this point, the TCPA’s prohibition against robocalling, robo texting, leaving prerecorded messages, and using an artificial voice to communicate with a consumer via their mobile phone does not violate the Constitution. But we’re likely to see future legal challenges on this front.

Recently, ACA International was successful in challenging the state of Massachusetts’ COVID-19 ban on debt collection communications during the state of emergency based on free speech grounds. I would not be surprised to see a challenge to the TCPA as well as to the Fair Debt Collection Practice Act’s prohibitions on consumer communications based on free speech grounds.

Ready to Text in 2020?

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Don’t get left behind. Download your copy 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.

© 2020 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.

Posted by Rozanne Andersen

Rozanne Andersen, J.D., serves as Ontario Systems’ Vice President and Chief Compliance Officer. She is responsible for leading Ontario Systems’ corporate efforts and response to the CFPB’s launch of compliance examinations in the ARM industry. Rozanne's advocacy work on behalf of the credit and collection industry has resulted in landmark legislation and regulation at both the state level and the federal level with regard to the FDCPA, FCRA and HIPAA. In 2020, Rozanne was named Chief Compliance Officer of the Year (Large Company) by the international Women in Compliance Network.
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