Client Alert: From the Scheer Law Group: Auto Dialers Dialed Back (TCPA Regulation)

Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.

Date:  September 26, 2018
Client Alert:
To: All Scheer Law Group Clients and Affiliates:
Subject:  Auto Dialers Dialed Back (TCPA Regulation)

Background:

The relentless onslaught of unwanted phone solicitations has now fully saturated cells phone communications.  Whether prerecorded messages in another language or prerecorded greetings that dupe you into thinking a real person is calling, the calls are intrusive and increasing. However, consumer protection is expanding. Lenders should be aware and informed. Consumers too.

The Holding in the Marks Case: 

In the case of Marks v. Crunch San Diego, LLC (9th Cir., Sept. 20, 2018, No. 14-56834) 2018 WL 4495553, the U.S. Court of Appeals for the Ninth Circuit in a decision last week expanded the definition of an “auto dialer,” to protect consumers and limit even more unwanted communications.   The decision kept in force expanded definitions of what is deemed an auto dialer, which were adopted by the Federal Communications Commission (FCC) in a series of rulings from 2003 to 2015, and which were invalidated in March of this year.

The appeals court rejected the defendant’s argument that in order to qualify as an auto dialer, the equipment must operate without any human intervention. Industry groups had been advocating that the FCC take a narrower approach to define an Automated Telephone Dialing System (“ATDS”) as only equipment that which only is capable of dialing numbers without human intervention. The underlying facts in this case were that a company called Crunch Fitness (“Crunch”) would communicate offers and promotions to prospective and current gym members sending text messages through its Textmunciation system. The Crunch employee logs onto the system, selects the recipient phone numbers, generates the message and the date and time for the message to be sent. Crunch argued that the TCPA only prohibits fully automated communications and that the need for a human to specially input the time, date and message to the customer takes the ATDS out of the reach of the statute.  Marks v. Crunch San Diego, at *6 and 9).

The Court cited the frustration that millions of Americans face from ATDS and noted legislative findings, including the following:

“They wake us up in the morning; they interrupt our dinner at night; they force the sick and elderly out of bed; they hound us until we want to rip the telephone right out of the wall.” 137 Cong. Rec. S16,205 (daily ed. Nov. 7, 1991) (statement of Sen. Hollings). Recipients deemed that “automated telephone calls that deliver an artificial or prerecorded voice message are more of a nuisance and a greater invasion of privacy than calls placed by ‘live’ persons.” S. Rep. No. 102-178, at 4. Among other reasons, “[t]hese automated calls cannot interact with the customer except in preprogrammed ways, do not allow the caller to feel the frustration of the called party” and deprive customers of “the ability to slam the telephone down on a live human being.” Id. at 4 & n.3 (citation omitted).” Marks v. Crunch San Diego, LLC at *2.
The Court also noted the potential impact on public health and safety, when hundreds of calls could jam switchboards of hospitals and emergency care providers (Marks v. Crunch San Diego, LLC, at *2).

The Court then rejected the argument by Crunch that since a human had to turn on the ATDS and target the recipient, that this was not a true ATDS communication, holding that:

“We also reject Crunch’s argument that a device cannot qualify as an ATDS unless it is fully automatic, meaning that it must operate without any human intervention whatsoever. By referring to the relevant device as an “automatic telephone dialing system,” Congress made clear that it was targeting equipment that could engage in automatic dialing, rather than equipment that operated without any human oversight or control. 47 U.S.C. § 227(a)(1) (emphasis added); …Common sense indicates that human intervention of some sort is required before an auto dialer can begin making calls, whether turning on the machine or initiating its functions. Congress was clearly aware that, at the very least, a human has to flip the switch on an ATDS…. Crunch does not dispute that the Textmunication system dials numbers automatically, and therefore it has the automatic dialing function necessary to qualify as an ATDS, even though humans, rather than machines, are needed to add phone numbers to the Textmunication platform. Marks v. Crunch San Diego, LLC at *9.

Conclusion: 

There are legitimate reasons to use an ATDS.  Lenders often use them to advise their borrowers when a loan is delinquent, in order to avoid further escalation of a delinquency.  However, given the increasing willingness of courts to protect consumers, lenders will need to ensure that they properly obtain the required consent to communicate under the TCPA.  Lender must not only ensure proper consent, but also that the consent is not revoked. Lender must also monitor to ensure they are not inadvertently communicating to cell phone numbers that have been reassigned, or to third parties who have not given consent on a call number where the borrower has authorized communication, to avoid increasing liability for such calls.

Please call or email if you would like to discuss.

Spencer Scheer