Today's Trends in Credit Regulation

Debt Collectors May Rely on Consent Given to Creditor to Use Automated Equipment to Call Cell Phones
By Charles F. Dodge

An issue that comes up from time to time in servicing and collections is whether a servicer or debt collector may contact a consumer using a cellular telephone number. One potential obstacle to such calls is the Telephone Consumer Protection Act, which makes it generally unlawful to make any call using an automatic telephone dialing system or artificial or prerecorded voice message to any telephone number assigned to a cellular telephone service. There are exceptions to this general rule for calls made in an emergency situation and calls made by any person who has the “prior express consent” of the person being called. The Federal Communications Commission issued a declaratory ruling in 2007 interpreting the “prior express consent” requirement as follows:

Because we find that autodialed and prerecorded message calls to wireless numbers provided by the called party in connection with an existing debt are made with the “prior express consent” of the called party, we clarify that such calls are permissible. We conclude that the provision of a cell phone number to a creditor, e.g., as part of a credit application, reasonably evidences prior express consent by the cell phone subscriber to be contacted at that number regarding the debt. In the 1992 TCPA Order, the Commission determined that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.”

In the same declaratory ruling, the FCC created a valuable standard for servicers and debt collectors: with respect to the “prior express consent” exception, third-party debt collectors stand in the shoes of the creditor on whose behalf they are recovering the debt. In other words, consent given to the creditor to use an autodialer and/or a prerecorded message when calling a cellular telephone number provided by the consumer effectively gives consent to the creditor’s servicer and debt collection providers to use the number the same way. And, significantly, simply (but knowingly) giving a cellular telephone number in a credit application or in connection with the opening of an account amounts to effective consent.

Two federal courts have recently upheld the FCC’s ruling with respect to the “prior express consent” provision. In the recent case of Frausto v. IC System, Inc., 2011 U.S. Dist. LEXIS 93514 (N.D. Ill. August 22, 2011), a creditor hired a debt collector to attempt to collect a debt owed to PayPal from a consumer. The debt collector allegedly placed prerecorded message or autodialer calls to the debtor’s cell phone number, which the debtor had provided to PayPal when he registered to use PayPal. The debtor filed a class action against the debt collector, alleging that the calls violated the TCPA because the debt collector lacked valid consent to call his cell phone. Both parties moved for summary judgment, and the U.S. District Court for the Northern District of Illinois granted the debt collector’s motion. The court ultimately found that the debt collector could take advantage of the consent that the debtor provided to the creditor, consistent with the guidance from the FCC. The court first noted that, pursuant to the FCC guidance, a creditor has valid consent under the TCPA to call a cell phone if a consumer volunteers his cell phone number to the creditor. Frausto argued that the consent he gave when he signed up for his account and provided his cell phone number only applied to PayPal. The court disagreed, recognizing that the FCC interprets the “prior express consent” provision to permit a creditor to share that consent with a third-party debt collector calling on the creditor’s behalf.

In another case involving debt collection and the TCPA, the U.S. District Court for the Western District of New York also deferred to the FCC’s interpretation of the consent provision of the TCPA with respect to use of a cellular telephone number by a debt collector that uses an autodialer and/or a prerecorded message. See Moltz v. Firstsource Advantage, LLC, 2011 U.S. Dist. LEXIS 85196 (W.D.N.Y. August 1, 2011). In this case, Firstsource Advantage, LLC was attempting to collect a debt owed to Time Warner Cable from Thomas Moltz. Moltz sued, claiming, among other things, that Firstsource called his cellular telephone number several times using a prerecorded voice to deliver messages and that he never gave his consent for Time Warner or anyone else to use his cellular telephone number. Both parties moved for summary judgment. In its opinion on the motions, the court cited to the FCC guidance referenced in the Frausto case and noted that, pursuant to that guidance, consent given to the initial creditor can pass through to a debt collector working for the creditor to collect a debt. In this case, though, there was a dispute over whether and how Moltz gave Time Warner his cellular telephone number, so the court could not reach a decision on the merits of the motion for either party on that point. While the court did not ultimately hand down a decision on the issue, it is helpful that the court discussed the standard created by the FCC in the context of addressing the “consent” issue without questioning that standard.

While the FCC guidance is not new, these recent cases reflect that consumers are still willing to litigate the consent issue under the TCPA, notwithstanding clear guidance from the FCC that is four years old. Moreover, these cases should give servicers and debt collectors increased confidence in their use of more efficient, automated means of reaching consumers in connection with debt collection when the creditor for which they are working provides cell phone contact numbers for assigned debts. However, these two particular legal victories for debt collectors may not add up to much of an effective result for debt collectors on the whole, given that creditors are not always able to provide useful, working telephone numbers for their customers to a debt collector.

Charles F. Dodge is a partner in the Maryland office of Hudson Cook, LLP. Chuck can be reached at 410-865-5427 or by email at

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