The law around whether mortgage companies can use auto-dialing systems to call borrowers is complicated. The FCC has made it even more murky.
Litigation arising under the federal Telephone Consumer Protection Act (TCPA) has skyrocketed recently--by some accounts growing 37.5 percent in the past year alone. This surge has had broad-ranging effects across a wide variety of industries, particularly mortgage lending companies and debt collectors. [paragraph] Consumer litigation--often in the form of costly class actions--has transformed the TCPA from a statute aimed at restricting telemarketing practices and junk faxes to one that regulates communications between creditors and debt collectors and their customers. [paragraph] And with settlements and potential exposure in this area routinely in the multimillion-dollar range, the TCPA's impact on mortgage companies cannot be understated.
No cap on damages, huge settlements
The TCPA makes it unlawful to call a cellphone using an automatic telephone dialing system (ATDS) without the prior express consent of the called party.
The TCPA provides a private right of action for injunctive relief, actual monetary loss or $500 per violation, and up to $1,500 for knowing or willful violations. Arguably each call could count as its own violation, so damages can add up fast. And called parties can recover uncapped statutory damages without even needing to prove actual damages.
Recently potential TCPA liability has expanded with the increased use of mass communications technology and cellphones, perhaps unfathomable to Congress in 1991 when it passed the TCPA to stop intrusive and annoying telemarketing calls and prevent cumbersome junk faxes that wasted ink and tied up fax lines.
Cellphones are gradually supplanting residential landlines, and it is no surprise that the younger generation of homeowners--the burgeoning customer base of mortgage companies--often provide their cellphone numbers for primary contact.
While calling cellphones using an automated system without consent may seem like trivial conduct, the prevalence of multimillion-dollar judgments and settlements confirms the potentially severe consequences of violating the TCPA. Some companies have settled for mid-eight-figure amounts. In 2015, settlement amounts included $45 million, $12 million and $2.75 million.
Unlike cases brought under the Fair Debt Collection Practices Act (FDCPA), which caps class awards, the TCPA allows for massive judgments that can have devastating consequences for defendants who violate it. The uncapped potential exposure of TCPA liability could threaten or even annihilate a company.
Numerous industries that rely on communications as an integral part of their business have already been affected. Collection industries in particular are dependent on telephone contact with borrowers and, as a result, are actively seeking ways to avoid potential TCPA liability. Compliance with the statute remains the best strategy. But unfortunately, compliance is not so simple.
The Federal Communications Commission's (FCC's) recent interpretations have exacerbated the problem. In enacting the TCPA, Congress authorized the FCC to promulgate rules and regulations to enforce the TCPA--which it has done extensively in the 25 years since the TCPA was enacted. During that time, the FCC has taken an unabashedly pro-consumer stance far beyond the realm of telemarketing annoyance. And...