How to Break the Federal Debt-Collection Law — By Texting

By: Steven Eichorn

It’s quite clear that the Federal Trade Commission and the Federal Communications Commission view existing federal consumer protection and communications statutes as fully applicable to new modes of communication such as texting. One excellent recent example is the FTC’s stipulated settlement, including a payment of $1 million, with a debt collection agency that had sent out text messages in order to collect debts.

The FTC had filed suit under the Fair Debt Collection Practices Act (FDCPA) against National Attorney Collection Services, Inc., National Attorney Services LLC, and Archie Donovan (as an individual). This appears to be the first FTC complaint alleging the illegal use of text messaging to collect consumer debts. In addition, the defendants were also alleged to have violated the FDCPA in more traditional ways by publicly revealing consumer debts to family members and co-workers, sending mailings that had a picture on the envelope of an outstretched arm shaking out an upside-down consumer to empty the money in their pockets, and falsely portraying themselves as law firms or attorneys in phone calls and mailings, as well as in text messages. Of course, the “older” methods of violations were troublesome in and of themselves, but there were two specific points that we see as trend-setting in FTC enforcement.

The first point is the FTC’s emphasis that the medium of text messages does not change disclosure obligations under the FDCPA. The FTC has continued to crack down on illegal behavior that may be carried out by non-traditional means. As Jessica Rich, director of the FTC’s Bureau of Consumer Protection, has said, “No matter how debt collectors communicate with consumers — by mail, by phone, by text or some other way — they have to follow the law.”

The consumer protections in the FDCPA that require the disclosure in initial communications that the company is a debt collector and that any communications may be used to collect a debt apply equally to text messages, even though there may be significant space and size limitations. Likewise, any follow-up text message must state that the communication comes from a debt collector.

The second noteworthy point was the level of consent required by the stipulated order. The stipulated order provides that “express consent” shall mean that prior to sending a text message to a consumer’s mobile telephone: “(i) the Defendants . . . shall have clearly and prominently disclosed that the debtor may receive collection text messages on mobile phone numbers . . . 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 FTC appears to have adopted a more stringent definition of consent (similar to the FCC) and is using the stipulated order as a means of notifying companies and consumers of the higher standard. Of course, it is possible to argue that the FTC is only requiring these particular defendants to meet the higher standard because of their alleged prior bad acts. However, we believe it more likely that the FTC is attempting to enforce a standard of express consent similar to that which the FCC has recently promulgated. Consequently, all companies are well advised to meet this higher standard of consent.

The FTC has now put the industry on alert to ensure that their text messages comply with any applicable law. The idiosyncrasies of modern methods of communication do not limit the compliance obligation. Ignorance is not a defense, even though Donovan’s attorney said that “the companies are now in compliance,” and that “nobody was intending to violate the law.”