Farleigh Wada Witt Client Alert - FCC's TCPA Autodialer Ruling Invalidated

Client Alert

FCC's TCPA Autodialer Ruling Invalidated

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March 19, 2018

INTRODUCTION

On Friday March 16, 2018 the U.S. Court of Appeals for the D.C. Circuit issued its long-awaited decision on the FCC's 2015 ruling on autodialers under the Telephone Consumer Protection Act (TCPA). The court's decision invalidated the FCC's position that virtually all modern telephone equipment qualifies as an automatic telephone dialing system (autodialer), which is subject to restrictions on calls to mobile phone numbers without consent. Although some questions remain, as a result of this decision, telephone equipment that lacks the current capability to store and automatically dial a list of numbers should not be treated as autodialing equipment. This should allow credit unions to resume some types of calls and texts they may have curtailed following the FCC's Declaratory Ruling and Order 15-72 without resorting to "dumb" phones to make the calls.

FCC'S DECLARATORY RULING AND ORDER

The FCC's Declaratory Ruling and Order 15-72 adopted an expansive position that any equipment with the potential capacity to store or produce phone numbers and dial them could be treated as an autodialer - even if the equipment required modification or additional software to do so . Under the FCC's ruling, even ordinary smartphones could be treated as autodialers. Most modern telephone systems used by credit unions could therefore be treated as autodialers even if they were not actually being used in that way.

The TCPA imposes consent requirements for calls and texts to mobile phones using audodialer equipment. Marketing calls and texts require prior express written consent, in which the consumer signs a document granting consent to make marketing calls and texts to a specific phone number using autodialing equipment. The consent requirements include specific disclosures that must be made in connection with the consent. Non-marketing calls and texts (such as fraud alerts and collection contacts) require prior express consent, which is granted when the consumer provides the credit union with the telephone number as a means of contacting the consumer. No special disclosures or signature are required. For many credit unions, this brought outbound telemarketing calls to a screeching halt. It also created problems in making collection calls to members using phone numbers obtained through skip tracing or other third party sources. Some credit unions purchased "dumb" phones in order to be able to safely make such calls.

DC CIRCUIT COURT OVERTURNS AUTODIALER RULING

The FCC's action was immediately challenged by a variety of parties including individual businesses and trade groups. Briefs were submitted and oral argument was held on October 19, 2016. Although the court took more than a year to issue its decision, the ruling was worth waiting for. Most importantly, the court found that the FCC's focus on the potential capacity to store, produce, and dial a list of numbers was simply not supported by the language of the statute (the TCPA). In its briefing, the FCC argued that the Declaratory Ruling did not actually treat smart phones as autodialers. The court swept aside this argument as inconsistent with the actual language in the FCC's Ruling.

The court also found that the FCC had failed to clearly articulate what functions a device must perform in order to qualify as an autodialer. The court noted that the Commission referred to earlier rulings indicating that the "basic function" of an autodialer is to dial numbers without human intervention, but at the same time the Commission refused to adopt that "basic function" as a prerequisite for an autodialer.

In addition to the autodialer issue, the court also invalidated the FCC's stance on calls to reassigned numbers. The FCC held that consent for calls and texts given by a subscriber expires when the number is reassigned to a different subscriber. Therefore, according to the FCC, if a mobile number has been reassigned to a different subscriber, a caller could make one autodialed call or text to that number without violating the TCPA, but subsequent calls or texts would violate the TCPA. The DC Circuit found this approach to be arbitrary and capricious. The court declined to address one issue: whether the TCPA restrictions on calls made using autodialer equipment apply to calls made when such equipment is used without the autodialing function (i.e. autodialing equipment is used in a manual dialing mode).

WHAT DOES THE DC CIRCUIT'S DECISION MEAN FOR CREDIT UNIONS?

The DC Circuit's Decision nullifies the most significant portion of the FCC Declaratory Ruling and Order - the definition of what constitutes an autodialer. This court action directly challenged the validity of the FCC's actions rather than the application to a particular business or set of facts. Accordingly, the decision applies across the entire U.S. and not just in specific circuits. Its impact is to reinstate the status quo that existed before the FCC issued the Declaratory Ruling and Order. This means that if a particular piece of telephone equipment is not currently equipped or configured to make autodialed calls, it will not likely be treated as an autodialer. Credit unions may make marketing and transactional calls and texts to mobile numbers using equipment that is not autodialing equipment without undue fear of TCPA litigation. The question of whether manual calls to mobile numbers without consent using autodialer equipment in manual mode violates the TCPA remains unresolved. Credit unions that use autodialing equipment should remain careful about using such equipment for calls to mobile numbers without the appropriate consent, even if the autodialing feature is not used.

The FCC could appeal the DC Circuit decision to the Supreme Court or could request a review of the decision by the full circuit (the decision was issued by a three judge panel). We believe such action is unlikely. The new chair of the FCC is Ajit Pai, who wrote a blistering dissent as one of the commissioners when the agency issued the original Declaratory Ruling and Order. It is more likely that the FCC will reconsider these matters and issue a new Declaratory Ruling and Order at some point in the future.

If you have any questions about this issue, contact Hal Scoggins, Brian Witt or Kelley Washburn.


	Hal Scoggins has been providing legal advice to credit unions since 1991, focusing on state and federal regulatory compliance, deposit and lending operations, contract and business matters, corporate governance, CUSOs, and all other aspects of financial service delivery. He frequently conducts seminars on legal matters for the Northwest Credit Union Association, Credit Union National Association councils, local chapters, and other trade groups.
Hal Scoggins 503.228.6044 [email protected]

	Brian Witt represents credit unions and CUSOs on corporate, operational, compliance, executive compensation and financial service delivery matters. Practicing law for more than 30 years, Brian has vast experience working with credit unions at all levels from the teller line to the Board room. Brian has developed extensive compliance resources for member response management, vendor management and contract review, information security programs, security response guidelines, online delivery of financial services, and credit union consumer and business lending.
Brian Witt 503.228.6044 [email protected]

	With a background in banking and business, Kelley Washburn brings considerable experience and working knowledge in the areas of consumer and commercial law relevant to assisting financial service providers on matters related to legal compliance, and creditors' rights litigation. She monitors regulatory changes and legislation at the federal level and in Oregon, Washington, and California that affects financial service providers.
Kelley Washburn 503.228.6044 [email protected]

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The contents of this publication are intended for general information only and should not be construed as legal advice or opinion on specific facts and circumstances.