Rough Waters Ahead for Defendants Under the Telephone Consumer Protection Act, The Impact of the Eleventh Circuit's Osorio Opinion

June 9, 2014

The Eleventh Circuit's recent opinion in Osorio v. State Farm Bank, F.S.B., 2014 U.S. App. LEXIS 5709 (11th Cir. Mar. 28, 2014), could have profound consequences for businesses that are subject to the Telephone Consumer Protection Act (TCPA). In general, the TCPA is a consumer protection statute that prohibits certain telephone solicitations and automated telephone equipment. Although many TCPA cases involve the use of automatic dialing programs/systems, the TCPA also covers, among other things, prerecorded messages and text messages sent using an autodialer. The TCPA authorizes a private right of action for injunctive relief and the greater of actual damages or $500 for each violation. Moreover, a willful or knowing violation opens the door for a court to increase the monetary award up to three times. Not surprisingly, therefore, putative TCPA class actions are on the rise across the country. Osorio involved a consumer who provided the telephone number of a third party in connection with an application for insurance. Upon the applicant's failure to pay the balance due, the third party received autodialed telephone calls. In its opinion, the Eleventh Circuit issued several key rulings regarding the meaning of "prior express consent" under the TCPA.[1] First, the Court found that the "called party" for purposes of giving "prior express consent" is not the intended recipient of the call, but the current subscriber of the number called. Nonetheless, the current subscriber can be deemed to have given this "express consent" if the person who provided the phone number to the creditor had an agency relationship with the current subscriber that authorized the person to consent to the current subscriber receiving calls on that phone number. The Eleventh Circuit next addressed revocation of consent under the TCPA. Relying on the Fair Debt Collection Practices Act ("FDCPA"), which requires any request for communication to cease to be in writing, the district court ruled that consent under the TCPA could likewise only be revoked in writing.  The Eleventh Circuit disagreed. Noting that the TCPA includes no such "in writing" requirement, the Court reasoned that this silence meant that Congress intended to incorporate the common law, which permits oral revocation of consent. Therefore, the Eleventh Circuit held that, absent a contractual restriction to the contrary, "prior express consent" under the TCPA may be orally revoked. Osorio could embolden TCPA plaintiffs and create significant concern for debt collectors and/or any other company that makes solicitations that are covered by the TCPA. While the FDCPA includes a bona fide error defense, which provides protection for situations where a technical violation occurred notwithstanding the maintenance of reasonable procedures to avoid the violation, there is no such protection under the TCPA. Thus, if a client is provided incorrect information, there may be no defense. Companies should take all necessary and reasonable steps to ensure that they are obtaining contact information for the applicant/guarantor and not a third party. If possible, companies should try to negotiate for contractual indemnification for situations where the called party is not the current subscriber. The Eleventh Circuit also might have made it more difficult for defendants to get summary judgment in TCPA cases. Whether an agency relationship existed with the called party is a question of fact determined as a matter of state law. As in Osorio itself, consequently, this issue could be deemed to raise a jury question that precludes summary judgment. Thus, a contractual choice of law provision may prove critical. Additionally, the Osorio decision creates a logistical nightmare for debt collectors. Many consumer debtors voice displeasure with the fact they are being called and often request that calls cease, even in situations where the debt is not in dispute or where they gave written consent for the calls in the first place. This creates a significant hardship on the company initiating the calls and in interpreting a consumer's oral instructions, especially when they are not clear. Plaintiffs will almost certainly contend that even the slightest and most obscure oral request for calls to cease constitutes revocation, thereby creating an issue of fact. Companies who perform activities which fall within the TCPA should also take steps to shore up compliance. Training procedures should be updated and employees should be instructed as to how to notate accounts where a consumer does revoke consent. Employees and staff should be trained that the TCPA allows an individual to orally revoke consent to receive autodialed telephone calls. This is not to be confused with the FDCPA's written requirement for a request to cease communications. This distinction is critical because if a debt collector makes an incorrect representation to a consumer, it could violate the FDCPA. To the extent it is economically feasible, if live calls are recorded, those calls should be maintained for as long as possible because the recording is the best evidence of whether consent was orally revoked. Nevertheless, even with a recording, it is still entirely possible that a consumer's directions could be open for interpretation, thereby creating an issue of fact and surviving summary judgment. Finally, it is unknown whether the Eleventh Circuit was taking an activist approach with respect to the TCPA or whether it was only addressing the specific facts in front of it. Currently on appeal to the Eleventh Circuit is another TCPA case, Mais v. Gulf Coast Collection Bureau, Inc., 944 F. Supp. 2d 1226 (S.D. Fla. 2013). Mais involved, among other things, an outstanding medical account which was placed with a debt collector for collection. One of the central questions in Mais is whether a patient's consent under HIPAA for his or her medical provider to use and disclose patient information, including phone numbers, equates to "prior express consent" for affiliates and agents of that provider to call the patient on his cell phone for debt collection purposes using an automated telephone dialing system. In a 2008 declaratory ruling, the Federal Communications Commission ("FCC") stated that "prior express consent" under the TCPA will be found whenever a person has provided his cell number to a creditor in connection with the transaction that resulted in the debt. The Southern District of Florida, in Mais, rejected the FCC's ruling and refused to give it deference. The Court held that the Defendants were not entitled to summary judgment on their consent defense. This ruling is extremely dangerous for the debt collection industry since companies and debt collectors frequently rely upon the information provided to their clients for the purpose of making telephone calls. Indeed, it is indicative of the importance of the issue that the FCC and the Association of Credit and Collection Professionals each filed an Amicus Brief with the Eleventh Circuit in opposition to the District Court's opinion. If the Eleventh Circuit narrowly interprets the "prior express consent" language of the TCPA and rejects the FCC's declaratory ruling, it might create significant exposure to companies who use automated telephone dialing systems. It remains to be seen whether Osorio is in any way predictive of how the Eleventh Circuit intends to rule in Mais. If the Eleventh Circuit affirms the lower court's ruling, there will be profound repercussions in the collection and solicitation industries. As automated telephone dialing systems are commonly used to reduce cost, lower overhead, and increase collections, companies may be forced to cease using automated telephone dialing systems altogether or risk class action lawsuits. The financial impact could be catastrophic. For further information or any questions, please contact Matthew Robert Rosenkoff at 678.336.7280. [1] The Court also ruled that there is no blanket exemption from the TCPA for autodialed calls for which there is no separate charge.

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