FCC Releases Final Regulations for Federal Debt Collection TCPA Exemption

Prepared by:  Wes Huffman (whuffman@wpllc.net)  

The Federal Communications released final rules implementing a change to the Telephone Consumer Protection Act (TCPA) to provide an exemption to calls from automated dialing systems to mobile telephones “made solely to collect a debt owed to or guaranteed by the United States” without prior express consent.  The new rules were approved by FCC Commissioners by a vote of 3-2.

All five Commissioners issued opinions.  Two Commissioners were favorable of the FCC’s actions (Chairman Tom Wheeler and Commissioner Mignon Clyburn); one Commissioner concurred, but also noted the outcome “creates a legal landscape that is undeniably messy,” particularly when combined with the FCC’s recent Broadnet Declaratory Ruling and the Campbell-Ewald v. Gomez Supreme Court decision (Commissioner Jessica Rosenworcel); and two Commissioners dissented (Commissioner Ajit Pai and Michael O’Reilly).

In addition to granting the exemption, the Bipartisan Budget Act of 2015 authorized the FCC to promulgate regulations on these calls. The Commission states the new rules will:

• Permit calls made by debt collectors when the loan is in delinquency, and by debt servicers following a specific, time-sensitive event affecting the amount or timing of payment due, and in the 30 days before such an event.

•  Determine that consumers have a right to stop the autodialed, artificial-voice, and prerecorded voice servicing and collection calls regarding a federal debt to wireless numbers at any point the consumer wishes.

•  Specify that covered calls may be made by the owner of the debt or its contractor, to: (1) the wireless telephone number the debtor provided at the time the debt was incurred; (2) a phone number subsequently provided by the debtor to the owner of the debt or its contractor; and (3) a wireless telephone number the owner of the debt or its contractor has obtained from an independent source, provided that the number actually is the debtor’s telephone number.

The new rules are unlikely to improve efficiency in the collection of federal debts, as they limit these calls to only three per month. The three per month are per account, not per loan, meaning a creditor, servicer, or agency may only contact borrowers three times a month.

Further, the new regulations indicate the debt must be currently “owed to or guaranteed” by the federal government, but the FCC declined to define what exactly constitutes “a debt owed to or guaranteed by the United States,” which is likely to lead to further confusion.

It is clear that no advertising or telemarketing is allowed on these calls, and the call must be initiated solely for the purposes of collecting a debt owed to the United States.  However, the regulations and discussion remain silent on servicers and agencies working with borrowers on both federal and non-federal loans. Presumably, if a borrower requests to discuss other accounts, this would be permitted. However, all communications initiated by creditors, servicers, and collectors must be solely related to the collection of debts owed to the federal government.

In its discussion of the new regulations, the FCC discussed the variety of comments it received from other federal agencies, often with dissenting viewpoints.  The Federal Trade Commission (FTC) is apparently against increasing contacts between collectors and borrowers, regardless of their interaction.  The FCC cited the following from the FCC’s letter:  “Robocalling increases the number of possible collection contacts, and any expansion in their use likely will magnify consumer harms arising from debt collection calls.”

However, some federal agencies, such as the Department of Education and the Treasury Department’s Fiscal Management Service (FMS) called for additional contacts beyond three per month.  In its comments, the Department of Education stated it “does not believe that allowing loan servicers and [private collection agencies] to make three [federal debt collection calls] per month would measurably increase the likelihood that they would reach a borrower,” but a higher limit may increase efficiency.

To address these concerns, the new regulations set up a waiver process whereby federal agencies can appeal to the FCC Bureau of Consumer Protection to seek additional calls.  However, it is unclear how often the FCC intends to grant these waivers. Throughout the discussion of the new rules, the Commission notes that additional calls may be made without an auto-dialer—the new regulations seem to envision a scenario where auto-dialing vs. manual dialing is a simple process that can be done with the turn of a switch.

The new regulations are severely limiting, but there are some bright spots from where the FCC appeared to be headed in its proposed rules. The general rule is a debt must be at least 30 days delinquent, but the regulations do allow for the use of auto-dialers in certain pre-delinquency situations. Debt-servicing calls may be made pre-delinquency to alert borrowers of a specific time-sensitive deadline, such as income-driven repayment certification, the end of a deferment period, or another deadline for a change in status on the loan (i.e. forbearance, deferment, rehabilitation). The discussion specifically notes the federal student loan programs may benefit from pre-delinquency interventions to “enroll debtors in consumer-friendly programs and to keep them enrolled in those programs.”

The FCC had considered time limits on all calls, but ultimately decided not to limit the length of live calls. Pre-recorded and artificial voice messages, however, may only be 60 seconds in length, and text messages may only be 160 characters in length.  Additionally, each voice recording and text message must include a toll free number the customer can call to opt-out of receiving these calls. The opt-out message must be included on all calls, texts and recordings, and the stop call request applies throughout the life of the loan and must be honored in the event of a transfer.

The new regulations continue the “one-call window” for reassigned numbers. In the case of reassigned numbers, after one call (regardless of whether contact is made) all additional calls made to that number via auto-dialer are considered potential TCPA violations.  The FCC’s proposed rules suggested the Commission was leaning toward only allowing calls to the number made on loan applications, but the final regulations do allow for numbers subsequently provided by the borrower or independently obtained by creditors and collectors.  However, the onus for the veracity of independently obtained numbers is on the caller and the same “one-call window” applies to these numbers.

Calls are allowed from 8:00 a.m. to 9:00 p.m. at the borrower’s location.  The FCC chose not to address the prospect of differing area codes and zip codes for debtors, meaning collectors and servicers are likely to continue to use the most conservative estimate until a debtor’s location is verified.

The new regulations are expected to take effect 60 days from August 11, contingent upon approval by the Office of Management and Budget. The new rules supersede the FCC’s recent Broadnet Declaratory Ruling indicating the federal government and its contractors are not “covered persons” under TCPA, as the Commission decided Congress explicitly granted it the authority to regulate these calls.

Additional information on the new regulations is available online.