Ignorance isn’t Bliss: The Cost of Non-Compliance with TCPA
by Amy Ward on November 13, 2014
At D&S, we go to great lengths to protect ourselves and our clients by ensuring that we are compliant with lawful practices related to collections and other services that we provide. We maintain all necessary licenses, certifications, and provisions, as well as membership in the International Association of Commercial Collectors and the Commercial Law League of America. In addition, we perform regular audits of our operations and our conversations with debtors. In this post, we’ll be discussing the risks of the Telephone Consumer Protection Act (TCPA), empowering you with knowledge to protect your business—whether your efforts are through an internal team or a third party agency.
Understanding TCPA: Law, Litigation and Compliance
When the U.S. Congress first enacted the Telephone Consumer Protection Act of 1991, the technological landscape differed vastly from today’s more connected world. Intended to protect consumers from automated telemarketing phone calls, the TCPA has since acted as the basis for a growing typhoon of class action lawsuits. TCPA litigation affects banks, telecoms, and businesses big and small, and those in the financial sectors can find themselves particularly affected. In September 2014, TCPA suits filed against Accounts Receivable Management (ARM) companies alone increased 2.1 percent from the previous month and the numbers shows no signs of slowing. The price for ignorance or failure to comply with laws like TCPA is high—and the scary truth is that even enterprise companies often aren’t properly informed or don’t take these laws seriously. Keep in mind that under laws like TCPA, your business can be held accountable even when a third party organization acts unlawfully on your behalf.
In August of 2014, Capital One Financial Corporation and three associated collections agencies settled a TCPA claim for nearly $75.5 million, the highest TCPA settlement to date and indeed one of the largest in the history of jurisprudence. These massive settlements can incentivize further litigation and, thanks to technicalities within TCPA law, defendants find themselves forced to settle rather than risk paying even more staggering amounts. These large settlements, coupled with the relative ease of filing or joining a TCPA claim, have fueled concerns of litigation abuse and calls to reform.
Statutory Damages in TCPA Litigation
In an article prepared for the U.S. Chamber of Commerce’s Institute for Legal Reform, attorney Becca J. Wahlquist remarks that the TCPA has become a juggernaut, “a destructive force that threatens companies with annihilation for technical violations that cause no actual injury or harm to any consumer.” The central problem with the TCPA, she argues, is its inclusion of uncapped statutory damages.
Statutory damages are dollar amounts or other means of restitution established within a law itself. Rather than leaving the award to the discretion of a judge or jury, the minimum remedy is defined and mandated by law. With these statutory damages in effect, it’s understandable that many businesses choose to settle even the most frivolous of claims rather than risk devastating judgments. If your business is not working with a partner that is fully educated on which actions can potentially initiate a claim, it’s in your best interest to seek out information to mitigate risk associated with TCPA.
TCPA Litigation Threatens Businesses Regardless of Size
In Wahlquist’s article, she further explains how the TCPA impacts businesses in all industries and of all sizes. Small businesses are at risk due to a legal doctrine related to statutory damages: strict liability. If a tort or crime is codified with a strict liability clause, there is no requirement of intent or negligence on the part of the defendant. The fact that the proscribed action occurred is all that’s required for a claimant to recover damages, without any consideration of fault, intent, or even knowledge that their conduct is forbidden. As such, an inexperienced owner of a small business can potentially find themselves owing millions in damages with no defense available for conduct they had no reason to believe was illegal.
Large companies, on the other hand, often encounter claims as a result of vicarious liability, a concept which holds employers responsible for the actions of their employees, agents, and in some cases, third parties who act to “benefit” the otherwise unwitting business. The fact that you’ve taken reasonable measures to prevent TCPA violations within your company and in dealings with business partners is irrelevant. This is yet another reminder of how critical it is to ensure that you always work with reputable and well-educated partners in addition to focusing on continued educated for any members of your staff who interact with customers or oversee those who do.
Safeguard Your Financial Services Business for TCPA Compliance from TCPA Litigation
Companies in the financial sector find themselves subject to numerous consumer protection statutes, from the Truth in Lending Act (TILA) to the Fair Debt Collections Practices Act (FDCA). Unlike the TCPA, these acts have damage caps limiting the amount claimants can recover. While reformers continue to campaign for a similar cap for the TCPA, businesses should remain vigilant of violations and current on compliance and legal developments.
For example, new TCPA regulations in 2013 established that written consent is required for most automated telemarketing communications. This is good news for businesses in the financial services sector thanks to to an earlier ruling by the Federal Communications Commission (FCC) defining consent within a creditor-debtor relationship. The ruling states that by providing a phone number “during the transaction that resulted in the debt owed,” i.e., a credit application, the customer has given express consent to receive collections calls at said number. This rule is still relatively new and undergoing judicial refinement regarding issues of timing, ambiguity, and other considerations of the consent.
Your business can guard itself against the complexities and expense of TCPA litigation through diligent compliance. The FCC has established a website that provides instructions, useful links, and answers to frequently asked questions about TCPA compliance. Ultimately, your greatest protection from TCPA claims are your own practices. Together with D&S Global Solutions, your business can mitigate the dangers of litigation and improve the relationships you share with your customers through an informed, efficient, and courteous collections process.