Proposed FCC Change to TCPA would Negatively Impact ARM Industry

The Federal Communication Commission (FCC) recently proposed stricter guidelines on telephone communications that would set debt collection efforts back decades, according to people familiar with the proposal.

Most in the industry agree that the communication habits of young adults have made it harder for account receivable management professionals to correctly identify and contact Generation Y consumers (“American Debtor Pool Undergoing Massive Demographic Shift,” Jan. 28). Debt collectors would like nothing more than to be allowed to freely use new communications platforms — such as cell phones, text messages and social networks — to contact the younger demographic.

But a recent proposal from the FCC removes a longstanding exemption for the ARM industry for certain rules governing the use of communication technology.

Last month, the FCC released a Notice of Proposed Rulemaking to amend the Telephone Consumer Protection Act (TCPA).  The FCC said it wants current TCPA rules to conform to the Federal Trade Commission’s (FTC) recently amended Telemarketing Sales Rule (TSR).

The new TSR, which became effective in October 2008, bars the use of prerecorded telemarketing calls without a consumer’s written consent, and it requires prerecorded calls to include future opt-out options.

Adam Peterman, ACA International‘s government affairs director, said creditors and debt collection agencies currently are exempt from the FTC’s Telemarketing Sales Rule. But he said if the FCC’s proposed rule under the TCPA is enacted as currently proposed, the industry will suffer.

"If it goes through it would have a very negative impact on our industry," Peterman said, adding that the FCC’s proposed change to the rule implementing the TCPA does not exempt creditors and collection agencies.

The FCC has yet to publish the proposed amendments to the rule in the Federal Register requesting public comment. But Peterman expects it will be published soon. He said ACA is prepared to respond.

Among other things, ACA wants to make sure that the FCC amendment to TCPA rule doesn’t prohibit calls to wireless numbers and land lines in some cases, and that new regulation doesn’t lead to an increase in consumer lawsuits against collection agencies.

“The rule is unclear enough right now that companies are getting sued.  We need some clear guidance that relieves us of the ligation problem," he said.

Jerry Greenblatt, president of El Cajon, Calif.-based collection agency Inland Capital Services, told insideARM that his firm tries to avoid calling cell phones so consumers won’t incur a charge and the firm doesn’t violate the Fair Debt Collection Practices Act (FDCPA). But their contact information files are beginning to include more cell numbers.

“Most people are converting to cell phones and there will be fewer land lines in the future,” Greenblatt said, and speculated that 60 percent to 70 percent of the communication by young people is done though text messaging. “The industry needs to address it and be proactive on the issue.  I don’t want to see legislation requiring us to go out and skip trace every number we have to verify if it is a land line or cell phones before we call it. That would make it impossible to collect.”

“When we talk to our consumers we ask for the best number to reach them as part of our information update procedures,” Greenblatt said. But he worries that their efforts may not be enough to protect his firm if the consumer moves to a different time zone, making contact-time violations under the FDCPA more likely.

“I would like to have it addressed before the industry faces multiple lawsuits on the issue,” he noted.

Peterman said ACA knows that the industry wants more clarification on the use of modern-day mediums to contact debtors. However, now is not the time to proactively seek changes to laws governing the industry, he said.

"We recognize that the FDCPA is woefully obsolete and needs modernization reforms.  On the other hand, there are some pretty punitive changes that consumer groups have on their agenda and with the political climate being so turbulent right now, we are best served to sit prone, ready to respond, at least through the election cycle," Peterman said.

However, Peterman said ACA has learned that Congress may seek changes to the FDCPA. He said ACA will be prepared to respond with its proposal for changes to FDCPA.  

“We are waiting for Congress to take it up on its own accord, and we will respond in kind,” he said.

Editor’s Note: insideARM and ACA International will be hosting a free Webinar on the legislative and regulatory environment in the ARM industry at EXPO 3.0, February 16, 2010. To learn more about the event and to register, please visit http://www.insidearm.com/expo/.