Today's Trends in Credit Regulation

A Closer Look at the Struggles of TCPA Compliance
By Michael A. Goodman

Dealers and finance companies that contact their current and prospective customers by phone may be feeling overwhelmed by the surge in Telephone Consumer Protection Act litigation, the wide range of TCPA issues being litigated, and the lack of favorable - or even consistent - rulings from courts considering similar allegations. While some companies might dismiss the TCPA as obscure, callers ignore this law at their peril. The TCPA has created a minefield of private rights of action, generous statutory damages calculations, low hurdles for surviving motions to dismiss or for summary judgment, and burden-shifting for key elements of causes of action.

Several issues in particular arise repeatedly in TCPA private litigation without clear, consistent resolution that could provide some certainty, whether favorable or not. At the same time, a number of petitions currently pending before the Federal Communications Commission seek guidance on a variety of TCPA compliance questions. In a world more perfect than ours, the unresolved issues that plague companies would match up neatly with the issues the FCC will address in these petitions. Unfortunately, there is little overlap. This article will explore the array of compliance challenges companies face and the largely distinct issues before the FCC.

Willful or Knowing Standard

The first key unsettled issue in TCPA litigation concerns the willful or knowing standard that triggers the availability of treble damages for violations. The TCPA establishes a fixed $500 statutory damages calculation for certain violations and an "up to" $500 statutory damages calculation for other violations. Courts have discretion to award up to three times this amount based on a finding that violations were willful or knowing. Some courts have held that a plaintiff can trigger the escalated statutory damages calculation by showing that the defendant intended to engage in the conduct at issue, without requiring a showing that the defendant knew the conduct violated the TCPA or that the defendant acted recklessly in this regard. Other courts have required a heightened showing that the defendant willfully or knowingly intended to violate the TCPA in a calling campaign. Private plaintiffs routinely allege that violations were willful or knowing, and the lack of clarity in the proper standard for this allegation adds unneeded uncertainty to an important element of TCPA litigation. None of the petitions currently pending before the FCC address this issue.

Offers of Judgment

The second key unsettled issue concerns whether an "offer of judgment" made to an individual plaintiff can moot a TCPA class action. An offer of judgment that would provide the plaintiff with the full recovery he or she could obtain through litigation could potentially deprive the plaintiff of standing to bring the lawsuit by eliminating any live controversy between the parties. The trickiest fact pattern involves an unaccepted offer of judgment made before the plaintiff has moved for class certification. Federal district courts have resolved this issue in various ways, with no clear majority view. Without a clear standard, defendants looking to exit a putative TCPA class action quickly and inexpensively face this additional uncertainty. None of the pending FCC petitions address this issue.

Class Certification

The third key unsettled issue arises when courts must determine whether or not to certify a class in a TCPA private action. In recent years, courts have resolved the question of whether federal district courts hearing TCPA private actions should apply federal or state class certification standards. Two U.S. Supreme Court opinions settled this issue in favor of the federal standard. With this resolution, defendants lost the ability to argue that state laws prohibiting TCPA class actions mandated denial of class certification motions. Parties continue to debate if putative class actions can satisfy federal standards. This analysis is highly fact-specific, especially with respect to TCPA provisions requiring the called party's consent. Courts have struggled with whether the consent requirement means that individual issues predominate over issues common to the class as well as whether plaintiffs have successfully identified an ascertainable class when so little may be known about the details of a calling campaign. Several of the FCC petitions raise issues regarding consent, but not in ways that invite the FCC to address the strengths and weaknesses of class certification in TCPA private actions.

Arbitration Agreements

The fourth unsettled issue concerns the applicability of arbitration agreements to TCPA disputes. In four recent cases, courts have enforced arbitration agreements as applied to TCPA disputes, generally reasoning that the disputes, which typically arise from a creditor's collection calls, are sufficiently related to the parties' underlying relationship to be subject to an arbitration agreement. A fifth recent case, however, declined to apply an arbitration agreement to a TCPA dispute. The agreement in this case applied to any claim or dispute arising from or relating to the plaintiff's account with the defendant. The court concluded that the TCPA claim related to the manner in which the creditor attempted collection, a matter that was beyond the scope of the arbitration agreement. Given that companies rely on arbitration agreements to ward off exposure to class actions, this opinion may open a significant new front regarding TCPA risk assessment. The pending FCC petitions do not address this issue.

Sharing Consent

The fifth unsettled issue concerns the ability of a party who obtains valid consent from a called party to share that consent with third-party callers. While the FCC settled the issue in favor of a creditor's ability to share consent with a third-party collection agency, there is greater uncertainty if the sharing occurs in other contexts. Of the petitions currently pending before the FCC, four relate to the TCPA's consent standards. However, none of these petitions ask the FCC to address this specific issue. Notably, this question of the ability to share consent can arise outside the context of companies and their service providers. For example, lead generation models and indirect auto credit models anticipate that a consumer will initiate a relationship with one party (i.e., the lead generator or the motor vehicle dealer) and ultimately do business with a second party (i.e., the party receiving the lead or the assignee of the dealer's retail installment sales contract). Companies engaged in these models are struggling to determine how to obtain and share valid consent in ways that are consistent with consumers' expectations and the text of the TCPA.

Two of the four petitions that involve the TCPA consent standard seek a ruling that consent obtained prior to the October 16, 2013, effective date of the FCC's new "prior express written consent" standard for sales calls need not be replaced with the new, stricter consent. The other two petitions seek rulings that package delivery messages and on-demand text messages are not subject to this standard.


The sixth unsettled issue involves who may bring a TCPA claim. The substantive TCPA provisions and related rules promulgated by the FCC refer to the rights of the "called party," without defining that term. Because the TCPA is a strict liability statute, callers face liability for accidentally calling a wrong number or calling a number that has been reassigned from a customer to an unrelated third party. In addition, plaintiffs have sued based on the fact that they answered a call properly placed to a second person at the number called. Defendants in these cases routinely argue that the plaintiff lacks standing to sue because the caller intended to place a legally permitted call and any violation was inadvertent. These arguments typically fail as applied to wrong number calls and calls to reassigned numbers. However, courts have stopped short of imposing liability for calls properly placed to a customer's phone number that happen to have been answered by someone else at the number. Nevertheless, courts struggle with this issue and would benefit from FCC guidance.

Helpfully, two of the eleven current FCC petitions address this issue. One petition asks the FCC to take the position that a company that has valid consent from the person it intended to call would not violate the TCPA by calling that person at the cell phone number on file if that number has been reassigned to an unrelated third party. The petition would limit this position to non-sales calls subject to the TCPA's "prior express consent" standard.

A second petition similarly requests an FCC ruling that creates a TCPA safe harbor for "wrong number" non-sales calls to cell phones that are placed using an autodialer. The petition also argues that the consent a consumer provides by volunteering his or her cell phone number to a creditor should establish consent to call any cell phone number assigned to the consumer, not just the phone number the consumer has volunteered to the creditor. Since courts have criticized the FCC's position that volunteering a cell phone number constitutes valid express consent to be called at that number, the FCC is unlikely to extend that form of consent still further to apply to a cell phone number that the consumer has not provided to the caller.

Regulated Systems

The seventh unsettled TCPA compliance issue that companies are currently struggling with is whether or not their individual calling system satisfies the TCPA's definition of a regulated "automatic telephone dialing system." Callers using a regulated autodialer to call a cell phone must have the called party's "prior express consent" for non-sales calls and "prior express written consent" for sales calls. The TCPA's definition of a regulated autodialer complicates this issue because it refers to the dialer's capacity rather than its actual use in a given call. Specifically, the term "automatic telephone dialing system" means equipment that 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. As a result, even a manually dialed call may be subject to the consent standards for autodialers if it is connected through regulated dialing equipment.

The FCC has further confused this issue by effectively reading out of the definition the reference to random or sequential dialing. The FCC has stated that callers no longer engage in these practices in significant numbers, so the FCC has instead incorporated the concept of capacity to dial without human intervention as the key component. Not only is this shift of questionable authority, it also has not provided sufficient clarification for callers and courts. In recognizing that the TCPA's autodialer definition could be interpreted to reach every smart phone in use, courts have attempted to strike a balance by considering the dialer's present capacity.

Three of the eleven petitions address the autodialer standard directly, and the FCC's response is likely to be the most significant of all those currently pending. One petition seeks a ruling that a "click-to-dial" dialing system is not necessarily regulated as a dialer unless it has the capacity to dial without human intervention. A "click-to-dial" system initiates a call by having a representative click a single button rather than enter all 10 digits of a phone number. That petition also seeks a statement from the FCC to judge dialing systems by what they are capable of doing without further modification at the time the calls at issue were placed.

Another petition also seeks a ruling that a dialing system's capacity is to be judged by its present ability at the time calls are made. The petitioner also asks the FCC to clarify that predictive dialers are not, by definition, regulated as autodialers by the TCPA. A further petition raises the smaller issue of whether an application provider that offers technology that may satisfy the autodialer definition may be held liable under the TCPA for text messages sent by independent users of the application. This petition also asserts that the TCPA's autodialer definition should be limited to equipment that can, at the time of a call, be used to store or generate sequential or randomized phone numbers.

TCPA compliance is not for the faint of heart. The easy availability of class certification and the non-discretionary statutory damages calculation have produced a recent spike in TCPA litigation. Different courts are reaching different conclusions in response to similar facts and arguments, adding further uncertainty to TCPA risk assessments. We all await the FCC's responses, even though these petitions will not resolve every TCPA issue currently keeping compliance attorneys up at night.

Michael A. Goodman is a partner in the Washington, D.C., office of Hudson Cook, LLP. Mike can be reached at 202-327-9704 or by email at

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