Financial industry petitions FCC to make robocall lawsuits harder to win

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If a financial industry petition to the Federal Communications Commission on the use of autodialers is successful, it could make Telephone Consumer Protection Act cases more difficult to prove for consumer attorneys. But a favorable ruling likely won't halt the proliferation of these suits.

There are 17 signatories to the petition, including the American Bankers Association, Credit Union National Association, Mortgage Bankers Association and other banking, credit union and mortgage industry groups. They are seeking a declaratory ruling that follows up an appellate court win that vacated much of a 2015 FCC ruling on the use of autodialers to call cell phones. That ruling said any device capable of making an automated call was subject to the TCPA, whether or not that capability was being used.

In March, the D.C. Circuit struck down that interpretation. But, "the court didn't say this is what the standard ought to be," said Michael Goodman, an attorney with Hudson Cook, who specializes in regulations about customer communications with various types of businesses, including mortgage lenders. "The court said what the FCC came up with isn't good enough, isn't sensible enough," and left it to the agency to come up with a new standard.

It is quite likely the FCC will agree with what the petitioners are seeking, said Sarah-Nell Walsh, an attorney with Baker Donelson, who represents mortgage companies, based on a statement that FCC Chairman Ajit Pai made in opposition to the 2015 ruling when he was a commissioner of the agency.

"In short, we should read the TCPA to mean what it says: Equipment that cannot store, produce, or dial a random or sequential telephone number does not qualify as an automatic telephone dialing system because it does not have the capacity to store, produce, or dial a random or sequential telephone number," Pai said.

"That is exactly what this petition seeks to do. They seek that exact same definition of an ADTS," Walsh said. The petition asks the FCC to define an automatic telephone dialing system as one that uses a random or sequential number generator without any human intervention and the functions must be active at the time the call is made. If human intervention is required, then the equipment is not considered to be automatic.

"There's an opportunity here, the chairman could do something that is far reaching that is not just limited to this petition. He could use this as his opportunity to take some big action relating to the TCPA," Walsh said.

Violations can be costly. Damages are set at a minimum of $500 per call or per text and the courts can triple that for a knowing or willful violation. And that's what makes TCPA low-hanging fruit for the plaintiffs' bar.

"It's just another instance where the legislation is stale. Congress has been too busy or too paralyzed or too whatever's going on in D.C. to pay attention to providing a clear definition to accommodate current practice and legitimate business needs," said Jordan Dorchuck, the executive vice president and chief compliance officer at BSI Financial Services, a subservicer.

"So the cost to service [mortgages] increases and ultimately it comes out in the wash somewhere because servicers have to spend a lot of money to do it the right way. The 2015 ruling was using an ax instead of a scalpel to fix a problem."

In July 2017, Ocwen Financial Corp. agreed to settle two TCPA cases for a combined $17.5 million.

"While the company believes that it had sound legal and factual defenses, Ocwen agreed to this settlement to avoid the uncertain outcome of litigation and the additional expense and demands on the time of its senior management that such litigation would involve," spokesman John Lovallo said in a statement.

But last November, RoundPoint Mortgage Servicing Corp. won a bench trial in the U.S. District Court for the Middle District of Florida. The judge ruled the plaintiff had provided prior consent to be called. A footnote in the ruling said the plaintiff, Larry Harrington, had previously won two TCPA cases and was awarded damages of $123,500 and $15,000.

TCPA actions have increased across all industries to 4,392 last year (after peaking at 4,860 in 2016) from just 14 in 2007, according to the consulting firm WebRecon. In the first three months of 2018, 954 TCPA cases were filed, a decline of 21% from the same period in 2017.

Even if the petition is successful, lenders shouldn't become complacent about TCPA compliance. Consent — whether it was given in the first place and/or properly revoked — remains a path for plaintiff's attorneys to start proceedings, Walsh said.

Meanwhile, Rep. Frank Pallone, D-N.J., the ranking member of the House Energy and Commerce Committee, proposed the Stopping Bad Robocalls Act, which if passed and signed into law, could again make TCPA compliance difficult.

"The Stopping Bad Robocalls Act would empower the FCC and the Federal Trade Commission to put an end to the annoying robocalls consumers face day in and day out," Pallone said in a press release. "Unfortunately, robocalls are proliferating and our agencies need new tools and authorities for the 21st century to better protect consumers from the abusive practices robocallers are employing."