ABA and CBA Argue FCC Proposed Rule Conflicts with Congressional Intent

Yesterday, the American Bankers Association (ABA) and the Consumer Bankers Association (CBA) filed joint comments to the Federal Communications Commission’s (FCC)  May 16, 2016 proposed rule regarding non-telemarketing “robocalls” made to collect debts owed to or guaranteed by the United States. A copy of the 18 page response can be found here.

Editor’s Note: The FCC was required by Congress to propose rules to implement a provision of the Bipartisan Budget Act of 2015 (2015 Budget Act or Act). That provision exempted from the Telephone Consumer Protection Act’s (TCPA) prior express consent requirement autodialed and prerecorded calls “made solely to collect a debt owed to or guaranteed by the United States.” On May 16, 2016 the FCC published its proposed rule. Comments to the proposed rule were due on June 6, 2016.

In the joint comments to the proposed rules the groups noted that the FCC’s proposal does not fully comport with the Bipartisan Budget Act of 2015: “Clearly, both the Administration and the Congress recognize that borrowers trying to manage their finances responsibly are best served if they communicate with their lender. The Commission’s recent interpretations of the TCPA, however, fail to reflect technological change and consumer communication preferences, preventing consumers from receiving important communications from businesses and government entities on their mobile phones, communications that provide important information that consumers want and need to receive.”

The two groups argue that the Commission has improperly replaced the policy determination made by Congress with its own.

“The limitations in the proposed rule would (1) exempt only calls made after the borrower is delinquent or, alternatively, in default; (2) exclude from exemption calls made to a number that belonged to a borrower but has been reassigned unbeknownst to the caller; and (3) extend the call restrictions to landline calls, to make such calls even more difficult than under current law. These limitations—which have no basis in the text of the 2015 Act—would significantly impair the very communications that Congress exempted from the TCPA. Making those communications more burdensome and less efficient with borrowers who use cell phones—as the proposed rule would do—impedes what Congress sought to accomplish.”

A statement published on the ABA website states: “With half of U.S. households now “wireless only,” Congress saw a need to ensure that borrowers could communicate with creditors and servicers about their debts, particularly about loan modifications and other foreclosure alternatives. However, the FCC “improperly replaced the policy determination made by Congress with its own,” ABA and CBA said, exempting calls only for delinquent or defaulted borrowers, excluding numbers that unbeknownst to the caller no longer belong to the borrower and extending TCPA restrictions to landline calls.”

In framing their argument, the ABA and CBA start by pointing out that the TCPA is generally out of date:

“Enacted in 1991, the TCPA is primarily a privacy statute, written to protect consumers from intrusive and unwanted telemarketing calls, but it also has other purposes. One such purpose was cost reduction in a time when cell phones were considered a luxury item. The restrictions on automated calls to wireless numbers expressly were written, in part, to control the shifting of telemarketers’ advertising costs to consumers by the use of random and sequential generators to run mass calling campaigns. This restriction had merit in 1991 when wireless service was expensive, relatively rare, and almost never used by consumers as their primary means of telephone communication.

Borrowers increasingly expect the convenience of being able to use mobile financial services. Nearly 50% of U.S. households are now “wireless-only,” with that percentage rising to over 70% for adults between 25 and 29.8 Many low income consumers rely on their cell phone for Internet access and other communications, because purchasing multiple devices, such as landlines and laptops, can be prohibitively expensive. Recently, the Federal Deposit Insurance Corporation (FDIC) found that customers with limited involvement with their bank prefer text messages to e-mails when receiving alerts from financial institutions, because texts are faster, easier to receive, attention grabbing, and quicker and easier to digest.”

Moving into the specific elements of the proposed rule the comments note that the Commission has proposed limitations on the Exemption that contravene both the text and spirit of the 2015 Budget Act. Among the items noted were:

1. The Commission Improperly Proposed to Limit the Exemption to Calls Made After the Borrower Is Delinquent or, Alternatively, in Default.
2. The Commission Should Not Limit the Exemption to Calls Made to Numbers Provided by the Customer.
3. The Exemption Should Not Exclude Calls Made to Reassigned Numbers.
4. The Commission Should Not Impose Restrictions on Calls for Which Congress Did Not Grant Authority to the Commission to Restrict (Landline calls).

Finally, the joint comments point out the fact that the proposed rules are inconsistent with other federal legislation, including many mortgage servicing rules.

insideARM Perspective

insideARM supports the joint ABA/CBA comments.

It is easy to ignore the potential impact the FCC proposed rule can have on the ARM industry outside of those companies servicing “debts owed to or guaranteed by the United States.”

If the currently proposed restrictions are enacted, it is foreseeable we will hear arguments that the CFPB should impose similar call frequency restrictions on collection efforts on all debt. As proposed, the Commission’s rule imposes a limit of three calls that lenders may initiate to distressed borrowers under the Exemption. While the three call limit is for purposes of the TCPA exemption only, it is not hard to imagine consumer advocates arguing “If the FCC thinks a maximum of three calls is reasonable, then the CFPB should consider a maximum of three calls.” That type of extension or extrapolation of reasoning would not be good for the ARM industry.