Today's Trends in Credit Regulation

FCC's Latest TCPA Guidance Gives Lenders and Finance Companies More to Worry About
By Michael A. Goodman

For many years, the Telephone Consumer Protection Act has vexed lenders and finance companies that want to benefit from upgrades in calling technology but find their efforts impeded by legal standards. Lenders and finance companies interested in reaching current customers as well as prospects must obtain consent to use an autodialer or a prerecorded message to call (or text) a consumer's cell phone.

For non-sales contacts, such as servicing and collections, the TCPA imposes a "prior express consent" requirement, which most companies comply with by asking consumers to volunteer their cell phone numbers on a credit application or elsewhere. For sales contacts, a more rigorous consent standard - "prior express written consent" - applies. This latter consent standard for sales calls took effect less than two years ago. Now that companies interested in securing that form of consent have implemented policies and procedures for doing so, the Federal Communications Commission has again rocked the boat.

In recent TCPA guidance that took effect on July 10, the FCC has injected uncertainty into the "autodialer" standard and has significantly broadened the range of dialing technology that may be regulated as an "autodialer." This is the greatest, but not the only, area of mischief in the FCC's new guidance. Under this guidance, lenders and finance companies should re-evaluate whether their current dialing technology triggers the required consent for autodialers. They also must accommodate the FCC's determination that TCPA consent is freely revocable by consumers and that companies cannot restrict the manner in which consumers revoke consent. And lenders and finance companies must concede that calls made in error to wrong numbers and reassigned numbers are almost always deemed TCPA violations, even if the caller could do nothing to prevent the violation.

This article provides an overview of the FCC's new guidance and how it changes the ways in which lenders and finance companies contact consumers in compliance with the TCPA.

The FCC's Declaratory Ruling and Order responds to 21 petitions, most of which were from businesses desperately seeking relief from a surge in private TCPA litigation. The most onerous TCPA provisions come with a $500 per violation statutory damages calculation that courts cannot modify to ensure that the penalty is proportionate to the violation. The result is a series of seven- , eight- , and even nine-figure statutory damages awards in TCPA class actions challenging conduct that may be irritating but is rarely injurious. In short, the TCPA is broken. These petitions presented an opportunity for the FCC to restore some balance, but the new guidance instead found a way to make a bad situation worse.

At a high level, the Declaratory Ruling and Order addresses the following key topics: (1) the definition of a regulated "autodialer"; (2) revocation of TCPA consent; (3) identifying "called parties" who can proceed with a valid claim; (4) callers' liability for "wrong number" calls and calls to reassigned numbers; (5) callers' ability to rely on consent that pre-dates the October 2013 "prior express written consent" standard; and (6) financial institutions' ability to send fraud prevention alerts without facing TCPA exposure. On most of these issues, the FCC claims to adopt the most consumer-friendly position, but the guidance routinely references "straw man" scenarios and arguments, revealing a disconnect between the FCC's suspicious notion of callers' motivations and what callers actually do.

"Autodialer" Definition

The FCC has repeatedly taken the position that predictive dialers are regulated as "autodialers" under the TCPA. Callers might not use them to generate and dial numbers randomly or sequentially, but the FCC maintains that predictive dialing equipment has the capacity to do so and also has the capacity to dial numbers without human intervention. The FCC affirms that position in the new guidance. Notably, the FCC rejects courts' recent efforts to place boundaries around the reference to the equipment's "capacity" in the "autodialer" definition. The definition establishes that equipment is judged by what it is capable of doing, rather than how a caller actually uses it.

Some courts had reasoned that the "autodialer" definition should be limited to the equipment's present capacity. In response, the FCC's guidance states: "[T]he capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities." In a related footnote, the FCC explains: "The functional capacity of software-controlled equipment is designed to be flexible, both in terms of features that can be activated or de-activated and in terms of features that can be added to the equipment's overall functionality through software changes or updates." This passage reflects an unfair suspicion of businesses using calling technology: Businesses have turned to flexible equipment in order to promote compliance with TCPA standards, using regulated "autodialer" equipment when they have valid consent to do so and disconnecting from that equipment when they lack that consent. Rather than acknowledge callers' efforts to promote compliance, the FCC takes the position that flexibility is motivated by a desire to evade regulation under the TCPA's "autodialer" definition.

In brushing aside arguments that favor a narrower concept of "capacity," the FCC's guidance fails to address the most significant issue under the "autodialer" standard: the fate of "click-to-dial" technology. Such technology promotes callers' efficiency but involves human intervention. The guidance cavalierly states: "[W]e do not at this time address the exact contours of the 'autodialer' definition or seek to determine comprehensively each type of equipment that falls within that definition that would be administrable industry-wide. . . . How the human intervention element applies to a particular piece of equipment is specific to each individual piece of equipment, based on how the equipment functions and depends on human intervention, and is therefore a case-by-case determination."

While the FCC concedes that a rotary-dial phone would require too much modification to be deemed to have the "capacity" to autodial, the FCC declined to take the position that a smartphone is not an "autodialer," blithely noting that there is no evidence of callers being sued under the "autodialer" standard for using a smartphone. That is cold comfort when a business's very existence can hinge on a single TCPA class action complaint.

With respect to click-to-dial technology, there are worrisome passages in the FCC's guidance that could give ammunition to the plaintiffs' bar. In the most troubling passage, the FCC rejects an "argument that the Commission should adopt a 'human intervention' test by clarifying that a dialer is not an autodialer unless it has the capacity to dial numbers without human intervention." This passage goes on to explain that a "human intervention" standard is merely a repackaged argument in favor of the "present capacity" standard rejected by the FCC. If the Commission is unwilling to limit the TCPA's "autodialer" standard to equipment that has the capacity to dial without human intervention, it is hard to find a reliable argument that click-to-dial technology is beyond the reach of the "autodialer" definition, at least according to the FCC.

Revocation of TCPA Consent

In response to several petitions, the FCC has concluded that there is a right to revoke TCPA consent, notwithstanding the fact that the TCPA is silent on this issue. Further, the FCC takes the position that consumers may revoke consent through any reasonable means, rejecting businesses' arguments that they should be permitted to set standards for the revocation process in order to make sure consent revocations are processed consistently and effectively. The FCC's guidance explains that consumers have a right to revoke TCPA consent using any reasonable method, including orally or in writing or even at an in-store bill payment location, among other possibilities. Without citing to record evidence, the FCC concludes: "We find that in these situations, callers typically will not find it overly burdensome to implement mechanisms to record and effectuate a consumer's request to revoke his or her consent." The FCC also notes that because callers bear the burden of establishing valid consent, they also are charged with maintaining records of revocation.

The TCPA's "Called Party" Standard

In the past several years, courts have wrestled with identifying the "called party" whose consent must be obtained under the TCPA. In the new guidance, the FCC explains that the "called party" could include both the subscriber (i.e., the party assigned and billed for the number) as well as the non-subscriber customary user of the number. Depending on the circumstances, either of these parties may give valid consent to be called at that number.

Liability for Calls to Reassigned Numbers and "Wrong Number" Calls

It has been unclear whether a call to a customer, from whom the business had valid consent, could violate the TCPA if the customer's number had been subsequently reassigned to an unrelated third party or if the business called an unrelated third party by mistake. Petitioners argued to the FCC that this issue was prompting suits alleging violations that were virtually impossible to prevent. The FCC is generally unsympathetic to callers put in this situation, but the guidance does create a limited safe harbor with respect to reassigned numbers. That guidance states:

"[C]allers who make calls without knowledge of reassignment and with a reasonable basis to believe that they have valid consent to make the call should be able to initiate one call after reassignment as an additional opportunity to gain actual or constructive knowledge of the reassignment and cease future calls to the new subscriber." Callers burn up this one additional call no matter the result of that call: Even a call that rings with no answer and no connection to voicemail puts the caller on constructive notice that the number has been reassigned and should not be called again. The FCC is hopeful that the market will provide callers with useful, timely information about reassigned numbers. Further, the FCC expressly eliminates the "one additional call" safe harbor for wrong number calls. Each and every wrong number call is a potential TCPA violation.

Relying on Older Consents

Effective October 16, 2013, a new, stricter consent standard for sales calls took effect. This "prior express written consent" standard required steps that no businesses complied with prior to that effective date. Three petitioners argued to the FCC that callers who had valid written consent under the older "prior express consent" standard should not be required to return to those consenting consumers for the new "prior express written consent." The FCC granted limited relief to these petitioners. For the 90-day period following the release of the FCC's Declaratory Ruling and Order, callers can rely on their old consent, provided that it was in writing. After that, all callers will be held to the "prior express written consent" standard for sales calls.

Limited Exceptions for Fraud Alerts

Finally, the FCC's guidance establishes a limited exception from the consent standard for calls and texts intended to prevent fraudulent transactions or identity theft. To qualify for this exception, businesses must satisfy the following eight requirements: (a) the calls and texts may be sent only to numbers provided by the customer; (b) the calls and texts must provide the financial institution's name and contact information; (c) the calls and texts may only be for the approved purpose and may not include any other content; (d) the calls are limited to one minute, and the texts are limited to 160 characters; (e) the financial institution may send no more than three messages per event over a three-day period; (f) the messages must offer an easy means to opt out; (g) financial institutions must honor opt-out requests immediately; and (h) the recipient may not be charged at all for the message, and the message must not count against any plan limits.


The TCPA's rigid penalty structure for consent-related provisions substantially escalates the significance of TCPA compliance and turns ambiguities into existential threats. If the TCPA were enforced only administratively, we could all rely on the FCC's judicious exercise of its prosecutorial discretion to manage compliance risks. However, the threat posed by private TCPA enforcement is tremendous and undeniable. There is little evidence in the Declaratory Ruling and Order that the FCC appreciates the situation that lenders and finance companies are in, trying to comply with ambiguous standards when every mistake can lead to years of litigation ending with statutory damages awards that are thoroughly disproportionate to the nature of the violation. As a result, the FCC's guidance is, at best, disconnected from reality and, at worst, an additional weapon for the plaintiffs' bar. Lenders and finance companies concerned with TCPA compliance are worse off today than they were before the FCC released its guidance.

Michael A. Goodman is a partner in the Washington, D.C., office of Hudson Cook, LLP. Michael can be reached at 202.327.9704 or by email at

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