The threat of being dinged, and dinged hard, by stepping on the TCPA litigation landmine is well beyond existential.
Credit union attorney John DeLoach says he has several clients now in the middle of lawsuits over alleged violations of the Telephone Consumer Protection Act.
“The liability threat is very real,” the Florida-based attorney says, “based on the outstanding cases, the lack of clear insurance and bond coverage, the statutory damage scheme, and the fact that you cannot be 100% compliant with the existing ruling under the TCPA.”
The statutory damage scheme? At $500 a pop, multiple phone calls to the wrong people can run up the tab quickly. And for credit unions and others using third-party collection services ? or even just in-house auto-dialers ? running afoul of the law can easily happen without even knowing it.
That was a major point made by Becca Wahlquist, Los Angeles-based head of Snell & Wilmer’s TCPA Practice Group, in a recent webinar sponsored by American Banker and Early Warning.
The title wasn’t sexy, “How to Optimize Your Outbound Contact Strategy and Improve TCPA Compliance,” but the consequences of TCPA violations should make every credit union stand up and take notice.
The liability threat is very real, based on the outstanding cases, the lack of clear insurance and bond coverage, the statutory damage scheme, and the fact that you cannot be 100% compliant with the existing ruling under the TCPA.
New Money From Old Technology
The main takeaway here was that while it was created to protect consumers, the TCPA has turned into an enormous money maker for plaintiffs, making patent and ATM fee notice trolls look like amateurs.
Wahlquist warns that millions of dollars are being made by plaintiff lawyers and their clients, in some cases by setting traps for calls that could be considered abusive under the TCPA and then settling with the callers.
The TCPA was passed in 1991 to address abusive telemarketing cold-call and collections practices during the days of expensive fax paper, clunky cell phones with hugely expensive by-the-minute plans, and home phones with no caller ID. The average consumer would know it as the creator of the Do Not Call List.
Technology has vastly changed, but the profit motive hasn’t. Lobbyist resistance has been strong to updating the law, and it has become notoriously hard to comply with, Wahlquist says.
Here are some reasons why:
There’s a big question over what is an auto-dialer. As long as the system being used is capable of making random and sequential calls, it’s considered an auto dialer, even if it’s not being used that way. The FCC ruled that way last summer. That order is now in front of a federal court and a ruling is expected maybe by next spring, Wahlquist says.
You are not liable for TCPA violations if you manually make the call, however. But you are exposed to liability when the calls are made on your behalf, not directly by you.
Wahlquist says there are people working in overseas centers who just punch numbers and then transfer the calls to the U.S. when they get somebody on the phone. She said their working conditions are probably pretty deplorable.
The attorney says she knows of one plaintiff who bought 37 old cellphones hoping for numbers that have been abandoned by people in bankruptcy, behind on bills, etc., who might get collection calls, auto-dialed or not. Then, the lawsuit threats begin. (This is where Early Warning came in. The company has a service that cleanses phone lists.)
Staying out of court looks very attractive, since at $500 a call, some of these settlements could avoid a $3 billion or more verdict at trial. “Staggering potential damages are driving settlements,” Wahlquist says.
The largest so far, she says, was a cruise line that settled for what may well end up being as high as $76 million. Capital One already settled one for $75 million, she says.
This is the kind of thing that's going to happen when you have that kind of money available without having to do much on the prosecution side. It's just phone records and 'you called me.'
It’s become such an attractive industry, Wahlquist says, that she knows of some lawsuits that have been filed by attorneys who don’t even know or ever talked to the plaintiffs. The plaintiffs simply replied to an add on a phone app.
She also mentioned a $438,000 settlement involving a taco restaurant chain that had a quality control employee who had government-issued tainted food alerts forwarded to his cell phone. He left the business and the phone number and someone else got that phone number and ended up threatening to sue over getting the alerts.
“This is the kind of thing that’s going to happen when you have that kind of money available without having to do much on the prosecution side. It’s just phone records and ‘you called me,’” she says.
It’s easy to call the wrong number. Early Warning says that 37 million phone numbers change hands every year. One client, a top five bank, found that 17% of its customer phone numbers had changed hands.
No Relief In Sight
“We need a balance between protecting consumers and annihilating liability for companies,” Wahlquist adds.
But far as the law being changed, the attorney says they’re working against lobbyists and lawyers who benefit from the lawsuit frenzy, so it’ll be tough.
We need a balance between protecting consumers and annihilating liability for companies.
So, what’s a credit union to do? DeLoach, whose firm counsels dozens of credit unions, advises relying on “competent compliance counsel for advice in order to mitigate the TCPA violation risks. These risks can only be mitigated and not eliminated under the current FCC ruling.”
He also says the specifics steps for TCPA compliance are too detailed for this space, and instead advises credit unions to at least do some homework, too.
“Just take a look at some of the TCPA compliance articles already out there to get a feel for the scope of the rule and the mitigating steps,” DeLoach advises.