There are a couple things worth blogging about in the Sept. 25 announcement by the Federal Trade Commission that it had settled its first case involving text messages under the Fair Debt Collection Practices Act.

First, the FTC believes that "clear and conspicuous" disclosure rules apply regardless of medium and regardless of the technological limitations of the consumer's device.

Second, the FTC is getting behind the Federal Communications Commission's re-interpretation of what it means for a consumer to give, within the meaning of the Telephone Consumer Protection Act, "prior express consent" to receive text messages on a mobile device.

These two facts require all businesses to re-evaluate the way they collect mobile telephone numbers from consumers as well as the way they use those numbers for debt collection and marketing purposes.

No Attempt to Follow the Law

In this case, the FDCPA violations identified by the FTC were obvious and not really technology-related. The FTC alleged that the debt collection company violated by FDCPA by sending the following text message:

[LAST NAME], [FIRST NAME], It is URGENT for you to call National Attorney Service regarding a very sensitive matter. [PHONE NUMBER WITH EXTENSION] Case # [CASE NUMBER]

The FTC alleged that this text message violated the FDCPA because:

• the message failed to inform the recipient that the sender is a debt collector, and that information obtained from the recipient will be used to collect a debt, as required by 15 U.S.C. 807(11); and
• the message failed to provide the recipient with information about the debt and inform the recipient of the right to dispute the debt, as required by 15 U.S.C. 1692g(a).

The debt collector, National Attorney Collection Services Inc., made no effort whatsoever to comply with these FDCPA provisions. The debt collector settled these claims, and others, for $1 million and acquiescence to a settlement order that spells out how future debt collection efforts must be handled.

The FTC does not have rulemaking authority under the Fair Debt Collection Practices Act. However, in this case, the FTC used its enforcement authority to make its views known regarding the process a debt collector should follow when seeking to obtain a consumer's consent to receive communications via text messages.

The interesting part of the case is in the settlement order. Specifically, the meaning given to two terms in the definitions section of the order.

Clearly and Prominently

The first term is "clearly and prominently." According to the settlement order:

"Clearly and prominently" shall mean:

A. In textual communications (e.g., printed publications or words displayed on the screen of an electronic device), the required disclosures are of a type, size, and location sufficiently noticeable for an ordinary consumer to read and comprehend them, in print that contrasts with the background on which they appear; ...

In other words, the FTC is not about to relax disclosure rules merely because the disclosures are transmitted on a small-screen device.

In a blog post discussing its settlement of an action under the Fair Debt Collection Practices Act brought against a debt collector that used text messages to contact debtors, the FTC underlined this point:

The FDCPA offers clear dos and don’ts about communicating with people who owe money. Regardless of the means you choose — mail, phone, text, or something else — the law applies across the board. Having trouble meeting the statute’s requirements in a particular medium? Then think twice about using it for that purpose.

The debt collector in this case will have to carefully consider whether the speed and efficiency of communicating with debtors via text message is valuable enough to merit taking on the legal risks associated with making an effective disclosure via text message to a small-screen device. Supplying the required disclosures in the text of the message seems cumbersome. Supplying the required disclosures via a hyperlink seems fraught with legal risk.

The FTC recently updated its guidance, .com Disclosures: How to Make Effective Disclosures in Digital Advertising. The guide defines "clear and conspicuous" for online marketers, a slightly different standard than "clear and prominent." Probably a good place to start, though.

I recently blogged about a political campaign marketer's request that the Federal Election Committee exempt communications to mobile devices from the requirement that political ads disclose the sponsor of the advertisement. The marketer argued that because mobile device screens are too small to legibly display the legally required notices, the disclaimer requirement should be eliminated. The FEC has yet to act on that request.

Prior Express Consent

The settlement order also set a high standard for this particular debt collector to meet if it ever wants to claim in the future that a debtor has given consent to receive text messages regarding an outstanding debt. According to the settlement order:

"Express consent" shall mean that prior to sending a text message to a consumer's mobile telephone: (i) the Defendants or their creditors shall have clearly and prominently disclosed that the debtor may receive collection text messages on mobile phone numbers provided to the original creditor or to Defendants in connection with the transaction that is the subject of the text message; and (ii) the individual has taken an additional affirmative step, including a signature or electronic signature, that indicates their agreement to receive such contacts.

The term "express consent" does not appear in the FDCPA. It does appear in the Telephone Consumer Protection Act, however, and it looks to me like the FTC has decided to write into the NACS settlement order the FCC's recent guidance on what is required, under the TCPA, for a consumer to give "express consent" to receive communications via text messages. This makes sense. A text message communication regarding a debt is subject to both the FDCPA and the TCPA.

The FCC, in rules that will become effective Oct. 16, 2013, adopted a similarly demanding definition of TCPA "express consent," providing:

(8) The term prior express written consent means an agreement, in writing, bearing the signature of the person called that clearly authorizes the seller to deliver or cause to be delivered to the person called advertisements or telemarketing messages using an automatic telephone dialing system or an artificial or prerecorded voice, and the telephone number to which the signatory authorizes such advertisements or telemarketing messages to be delivered. (i) The written agreement shall include a clear and conspicuous disclosure informing the person signing that: (A) By executing the agreement, such person authorizes the seller to deliver or cause to be delivered to the signatory telemarketing calls using an automatic telephone dialing system or an artificial or prerecorded voice; and (B) The person is not required to sign the agreement (directly or indirectly), or agree to enter into such an agreement as a condition of purchasing any property, goods, or services. (ii) The term “signature” shall include an electronic or digital form of signature, to the extent that such form of signature is recognized as a valid signature under applicable federal law or state contract law.

See In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278 (Feb. 15, 2012).

The fact that the FTC believes that debtor consent to receive text messaging communications from debt collectors should be subject to a heightened "express consent" standard is not news. In its 2009 report, Collecting Consumer Debts: The Challenges of Change, the FTC stated: "[T]he Commission believes that the law should allow collectors to call consumers on their mobile phones if they have given 'prior express consent' to such calls. … The Commission concludes that requiring that prior express consent be obtained provides consumers with enhanced protection against being charged without their consent for collection calls made to mobile phones."

Right now, as far as the FTC and the FCC are concerned, in order to lawfully obtain from a consumer the consent to receive communications via text message, the consumer must (1) be specifically requested to provide a mobile number for the purpose of receiving text message communications, (2) be informed that providing the mobile number is not necessary to obtain goods or services, and (3) indicate in some affirmative fashion assent to receive text message communications.

Courts today are divided over whether the TCPA's "express consent" requirement is as demanding as the FCC and FTC believe. See Roberts v. Paypal, Inc., No. 12-cv-0622 (N.D.Cal., May 30, 2013)(TCPA case where court held that consumer consented to receive text messages "simply by providing his cell phone number."); on the other hand, see Lusskin v. Seminole Comedy Inc., No. 12-cv-62173(S.D. Fla., June 19, 2013)(consumer does not expressly consent to receive automated calls or text messages by simply providing his cell number during a routine online transaction).

What Next?

The Fair Debt Collection Practices Act, enacted in 1977, is over 30 years old. Congress sealed the FDCPA in amber by declining to give the Federal Trade Commission -- or any other federal agency -- rulemaking authority to conform the law to changes in technology and business practices. The Internet went from non-existent, to a new fad, to commonplace, with no change whatsoever to the FDCPA. This may be changing. Congress gave the recently created Consumer Financial Protection Bureau rulemaking authority to modify the FDCPA. The CFPB has yet to use this authority, though I would be very surprised if a lobbying effort to ease the compliance challenges of electronic debt collection methods is not already underway.

Where does all this leave debt collectors today? The threat of ruinous class action litigation under the TCPA and FDCPA seems likely to force all but the riskiest debt collectors to follow the FCC's interpretation of what it means to obtain "express consent" to be contacted via text message. This will (if it hasn't already) require nearly every business to change how they structure consumer transactions by putting prominent, and detailed, disclosures around the collection of mobile telephone numbers. Business will also be required to obtain, and record, some tangible indication that a consumer has expressly consented to receiving messages on his or her mobile device.

As for mobile phone numbers already collected under weaker consumer protection standards, I would imagine they are substantially less valuable now for marketing and debt collection purposes.

By Thomas O'Toole  

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