The Collections Quandary: Tripped by a Cell Phone No More

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Americans are unplugging from their land-based telephones in increasing numbers – and, with do-not-call regulations, it’s raising concerns for collections professionals.

According to a recent report from the Center for Disease Control’s National Health Interview Survey (July-December 2008), 20.2% of US households are considered wireless-only, and another 14.5% of American homes have landlines, but use cell and mobile phones almost exclusively. Wireless numbers always have been a concern for creditors and collection professionals, but now it’s getting even more complicated.

A number in a database, which might have been indicated as a residential home number, or even previously recorded as a landline, indeed may have changed to a cell phone. It is no longer sufficient to screen for wireless-only exchange blocking, but to supplement such screens with those that have “ported” from landline to cell. An available commercial file of such numbers now tallies more than 2.6 million lines in the U.S. alone (disclosure, IMS offers such a file with a date stamp which can be helpful, and also offers wireless identification blocks), a number that grows daily (and updated in the IMS database file by 500 daily).

Certainly, as millions of individuals abandon their residential landlines by porting them to wireless service, the ability to call such numbers for debt collection purposes has become a dicey situation. In the U.S., collectors -- both in creditor organization and employed by third party agencies acting on their behalf -- are already subject to the requirements of Fair Debt Collection Practices Act (FDCPA), which prevent harassment and abuse, false representations and unfair means of collecting debts from individuals. But they are also subject to the Telephone Consumer Protection Act (TCPA), and this is where additional challenges arise.

Though the TCPA exempts calls that inform consumers when a bill is overdue and when prompt payment is required, the law does have restrictions on such activities that, too, are enforced when it comes to specific types of telephone-dialing equipment. The law specifically prohibits using predictive dialers, auto-dialers and pre-recorded message players when contacting cell phones of individuals responsible for payment, when the call is paid for by the recipient, and when no “prior express consent” (permission) is granted by the called individual.

FCC ruling in 2008 meant to clarify regulations...

A January 2008 ruling by the Federal Communications Commission shed further light on such restrictions, but not without controversy which I’ll elaborate on in a moment. In the ruling, the FCC stated that auto-dialed and pre-recorded calls to wireless numbers are permissible when there is “prior express consent” of the called party – but just how is such prior consent obtained?

Such consent was said to exist only when the consumer, who is the debtor, voluntarily provides his or her cell phone number to the creditor during the course of a transaction which results in the specific debt in question. The consent could be verbal, written, and provided on an application for credit, with each and every instance of consent documented for potential future retrieval.

Further, consent does not include numbers “captured” by automatic number identification or caller identification, numbers recorded by third parties who received permission from the consumer to call for another creditor, and – of course – any wireless number where an individual has expressed a request not to receive any calls at that number.

Importantly, calls dialed by humans – rather than dialing equipment – are not subject to TCPA restrictions on collections activity.

Evidence of the consent is best retained by the creditor in the usual course of business, with a time/date stamp, and with a recording if verbal (though varying state laws regarding call recording must be followed).

...Then a subsequent court decision cast a cloud...

In a May 2008 federal case (Leckler v Cashcall, Inc., District of Northern California), the court decided that the FCC went too far and improperly amended TCPA beyond Congressional intent. The plaintiff in this case provided her cell number on a loan application for which she was approved and later defaulted. Upon default, she was then contacted using both a pre-recorded call and other calls to her cell phone. The court said that providing a number on a loan application sets forth an expectation or a permission to receive calls – but not by extension to calls placed by auto-dialers or pre-recorded messages. The creditor must gain express permission for calls from such devices when collecting cell phone numbers.

However, the defendant then filed a jurisdictional motion to dismiss the case which was granted, in effect vacating the district court ruling. Now, numerous class-action suits have been filed in both state and federal courts to prevent calls to cell phones from pre-recorded message players and auto-dialers, including predictive dialers. The potential liability from such cases could be ruinous for collectors, and, as of this time, the outcomes of these cases are not yet known. In comparison, a single TCPA violation can result in an $11,000 fine per incident.

Either way, it may be a sound business practice (if not vital) to prevent such calls to cell phones using devices prohibited by TCPA when there is no express prior consent from the consumer given to the creditor (and agent) for collections and other calling. That consent may not be implied just because a wireless number has been offered by the consumer in a previous communication.

Gain consent – and know with confidence which calls are cell-phone numbers

Across the board, creditors should seek counsel to find ways to gain prior express consent for receiving calls from pre-recorded message players and auto-dialers, specifically. Proper consents could be handled through contracts with consumers, or in call center conversations with trained operators, for example. Technology that “captures” incoming cell phone calls should alert operators to intervene and gain permissions. And, most importantly, creditors should use screening suppressions to prevent calls to cell phones where permission is not present – including both wireless-only exchange blocking and supplemental “ported” landline to cell screens. Federal law allows a 15-day grace period for calling cell phones that have been ported from land-based lines.

Interestingly, there are also a significant number of lines (390,000 – and growing by 100 per day) that port in reverse: from cell phone numbers to land-based lines, thereby freeing such numbers from “prior express consent” requirements. These, too, can be useful for tracking to enable outbound calls for collection purposes.

Collections are a growing concern, so it is key that creditors perform data due diligence. With the right amount of counsel and data preparation, creditors can be assured that their telephone-based collection activity does not run afoul of cell phone contact restrictions.

Frank Rigano, chief executive officer of Interactive Marketing Solutions (www.ims-dm.com), has more than 20 years of experience providing marketing and technology solutions to business executives. He served as executive vice president of operations and administration for the [U.S.] Direct Marketing Association and senior vice president of operations for the American Management Association. Interactive Marketing Solutions, a member company of ACA International, is committed to developing innovative list and database management software and services designed to help businesses succeed in their marketing and collections efforts by mitigating the challenges imposed by privacy and consumer opt-out legislation. Frank can be reached at frigano@ims-dm.com. The information in this column is not intended as legal advice and may not be used as legal advice.