Today's Trends in Credit Regulation

Recent Events Clarify, Muddy TCPA Waters
By Michael A. Goodman

Folks who follow the Telephone Consumer Protection Act experienced legal whiplash this month. On May 9, 2013, the Federal Communications Commission released a Declaratory Ruling addressing a seller’s vicarious liability for violations of the Telephone Consumer Protection Act committed by a third-party telemarketer calling consumers on behalf of a seller. But just the day before the FCC released this Declaratory Ruling, a federal court laid waste to a prior FCC Declaratory Ruling, resulting in a serious challenge to FCC guidance that callers have been relying on for over five years and will bring unneeded uncertainty to those grappling with TCPA compliance.

The FCC’s Declaratory Ruling

The FCC was responding to petitions filed by federal and state government entities, a private plaintiff, and a defendant in two TCPA proceedings. The courts overseeing these proceedings directed the parties to file these petitions in order to seek clarity from the FCC as to a seller’s vicarious liability for its telemarketer’s conduct. In the Declaratory Ruling, the FCC rejected the argument that sellers should always be held vicariously liable for their telemarketer’s conduct. However, the FCC adopted a position imposing vicarious liability when principles of federal common law agency support it.

The FCC’s Declaratory Ruling considers two separate TCPA provisions: 47 U.S.C. § 227(b)(1)(B), which regulates the use of prerecorded sales messages delivered to residential lines, and 47 U.S.C. § 227(c), which establishes consumers’ do-not-call rights. The prerecorded message provision prohibits callers from initiating such calls without consent. The do-not-call provision establishes a private right of action regarding calls received “by or on behalf of” an entity. Notwithstanding this difference in statutory language, the FCC elected to impose a similar standard of vicarious liability to both provisions. (This election elicited a partial dissent from one FCC Commissioner, who would have imposed distinct standards to reflect the differences in the statutory language.)

According to the vicarious liability standard established by the FCC in this Declaratory Ruling, “a seller is not directly liable for a violation of the TCPA unless [the seller] initiates a call, but may be held vicariously liable under federal common law agency principles for a TCPA violation by a third-party telemarketer.” The Declaratory Ruling notes that the statute does not define the term “initiate.” Relying on dictionary definitions, the Declaratory Ruling takes the position that “a person or entity ‘initiates’ a telephone call when it takes the steps necessary to physically place a telephone call, and generally does not include persons or entities, such as third-party retailers, that might merely have some role, however minor, in the causal chain that results in the making of a telephone call.”

In support of its finding that sellers may be held vicariously liable for the conduct of third-party telemarketers, the FCC explained that “[f]ederal statutory tort actions, such as those authorized under the TCPA, typically are construed to incorporate federal common law agency principles of vicarious liability where, as here, the language of the statute permits such a construction and doing so would advance statutory purposes.” The FCC further explained that the agency relationship could include formal principal-agent relationships as well as situations constituting “apparent authority and ratification.”

The Declaratory Ruling also includes an extended discussion regarding examples of apparent authority, such as:

  • evidence that the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including access to detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information;
  • ability by the outside sales entity to enter consumer information into the seller’s sales or customer systems;
  • authority to use the seller’s trade name, trademark, and service mark;
  • the fact that the seller approved, wrote, or reviewed the outside entity’s telemarketing scripts; and
  • the fact that the seller knew or reasonably should have known that the telemarketer was violating the TCPA on the seller’s behalf and the seller failed to take effective steps within its power to force the telemarketer to cease that conduct.

The FCC concluded this discussion by noting that, at a minimum, a plaintiff’s ability to offer this type of evidence should be sufficient to shift the burden to the seller to demonstrate that a reasonable consumer would not sensibly assume that the telemarketer was acting as the seller’s authorized agent.

Notably, the FCC’s Declaratory Ruling refers only to sellers and telemarketers and does not address possible application of this guidance to non-sales contacts, such as servicing and collections. This may have been a function of the way the petitions seeking the Declaratory Ruling framed the issue: the questions presented to the FCC for consideration referred only to sales calls. However, one of the TCPA provisions addressed in the Declaratory Ruling, 47 U.S.C. § 227(b), is not limited to sales calls. This section regulates both prerecorded sales messages delivered to residential lines as well as autodialed and prerecorded message calls delivered to cell phones.

The statutory provision uses different wording in addressing calls to cell phones and prerecorded sales messages to residential lines – prohibiting “making” a call in the first case versus prohibiting “initiating” a call in the second case. The FCC’s regulation interpreting the TCPA deviates from the statutory wording. Under amendments to the regulation taking effect on October 16, 2013, the provision addressing non-sales calls to cells phones prohibits “initiating” calls; the provision addressing sales calls to cell phones prohibits “initiating, or causing to be initiated” calls, and the provision addressing prerecorded sales messages to residential lines prohibits “initiating” calls.

It is unclear whether the FCC would apply the vicarious liability guidance set out in the Declaratory Ruling to all parts of 47 U.S.C. § 227(b), and not just to the paragraph regulating prerecorded sales messages to residential lines. The Ruling states: “Addressing section 227(b) prohibitions in 2008 . . . we stressed that the ‘creditor on whose behalf an autodialed or prerecorded message call is made to a wireless number bears the responsibility for any violation of the Commission’s rules. Calls placed by a third-party collector on behalf of that creditor are treated as if the creditor itself placed the call.” This passage could reflect a FCC intent to impose vicarious liability more broadly with respect to regulated calls to cell phones; however, one could also argue that the Declaratory Ruling reflects an FCC intent to impose a consistent vicarious liability standard – one based on federal common law agency principles – throughout the TCPA.

The Federal Court Decision

The federal district court in the Southern District of Florida largely rejected an FCC 2008 Declaratory Ruling; declined to interpret the Hobbs Act as depriving the court of the ability to assess the substance of an FCC Declaratory Ruling in a TCPA private action; and refused to give deference to the FCC’s interpretation of the TCPA in the Declaratory Ruling. In Mais v. Gulf Coast Collection Bureau, Inc., the court considered whether a patient’s wife provided valid consent on behalf of her husband to be called on his cell phone. Mais was admitted to a hospital to obtain treatment. At that time, his wife provided his cell phone number on admissions paperwork. Mais later received treatment from a third-party radiology center. When Mais did not pay the bill owed to the radiology center, it referred his account to a third-party collection agency. The collection agency used the contact information Mais’s wife provided on the hospital admissions paperwork and called Mais’s cell phone to collect the debt. In response, Mais sued the collection agency, the radiology center, and the radiology center’s billing vendor for placing calls in violation of the TCPA.

The FCC’s 2008 Declaratory Ruling states that a consumer provides “prior express consent” to be called on a cell phone, as required by the TCPA, when the consumer volunteers his or her cell phone number to a creditor. The Ruling allows creditors to share that consent with third-party collectors calling on the creditor’s behalf. The Hobbs Act gives federal appellate courts exclusive jurisdiction to determine the validity of FCC orders in proceedings to enjoin, set aside, annul, or suspend an order. The handful of courts that have applied the Hobbs Act to the FCC’s 2008 Declaratory Ruling have found that they do not have the authority to disregard the FCC’s guidance on this consent issue. The Mais court rejected this approach. Rather, the court reasoned that the Hobbs Act did not apply to a simple TCPA private action applying the FCC’s Declaratory Ruling. The court then declined to give the FCC the deference generally granted to agencies interpreting statutes within their areas of expertise. The court refused to extend this deference because it found that the FCC’s interpretation of “prior express consent” was completely inconsistent with the statutory language. The court explained that what the FCC considered to be evidence of a consumer’s express consent was, at best, only implied consent. The Mais court also reasoned that, because the FCC’s 2008 Declaratory Ruling addressed the consumer credit context, it should not apply to the medical care setting at issue here. The Mais opinion introduces new uncertainty to callers who have relied on the FCC’s 2008 Declaratory Ruling with respect to the TCPA’s “prior express consent” standard.

The Mais opinion also considers the same concept of TCPA vicarious liability addressed in the FCC’s recent Declaratory Ruling. Unlike the FCC, the Mais court refused to apply a consistent vicarious liability standard to 47 U.S.C. § 227(b) and (c). The Mais court, like the partial dissent from the FCC’s Declaratory Ruling, took the position that basic rules of statutory interpretation required courts and agencies to give meaning to the fact that Congress used different wording in the two subsections. One of these basic rules holds that, where Congress uses different wording within the same statutory structure, that constitutes an expression of Congressional intent that the different provisions have different meanings. The Mais court rejected the use of federal common law agency principles in parts of the TCPA that speak directly to vicarious liability. Comparing differences in 47 U.S.C. § 227(b) and (c), the Mais court concluded that Congress had expressed an intent to establish vicarious liability with respect to the latter but not the former. We can expect the Mais court to take a dim view of the FCC’s recent Declaratory Ruling on this issue.

Michael Goodman is a partner in the Washington, D.C., office of Hudson Cook, LLP. Basis Points readers can reach Michael at (202) 327-9704 or by email at

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