Contacting Borrowers via Cell Phone for Debt Collection

1
Contacting Borrowers via Cell Phone for Debt
Collection

• Micheal Kahler
• Windham Professionals, Inc.

2
Our Discussion Today

• Communication Laws
• Telephone Consumer Protection Act
• What is Creating Our Problem Today
• The Affect on the Student Loan Collection
  Industry
• What We Can Do
• Cell Phone Use Statistics

3
Laws Affecting Communication

• Communication Act of 1934
• Establishes the Federal Communications Commission
  (FCC)
• Regulates interstate, international, and maritime
  communications including radio, television, wire,
  satellite, and cable.
• Jurisdiction covers all 50 States, the District
  of Columbia, and U.S. possessions.

4
Laws Affecting Communication

• Telephone Consumer Protection Act of 1991
• Restricts the use of automated dialing systems,
  artificial or prerecorded voice messages, SMS
  text messages received by cell phones, and the
  use of fax machines to send unsolicited
  advertisements.
• Specifies technical requirements for fax
  machines, autodialers, and voice messaging
  systems principally with provisions requiring
  identification and contact information of the
  entity using the device to be contained in the
  message.

5
Laws Affecting Communication

• Telephone Consumer Protection Act of 1991
• General provisions
• Unless the recipient has given prior express
  consent, the TCPA and the FCC rules under the
  TCPA generally require
• Solicitors may not call residence before 8am or
  after 9pm local time
• The solicitor must maintain a Do Not Call
  (DNC) list, which must be honored for 5 years
• Solicitors must provide their name, the name of
  the person or entity on whose behalf the call is
  being made, and a telephone number or address at
  which that person may be contacted.
• Solicitation calls cannot be made to residences
  with artificial voices or recordings

6
Laws Affecting Communication

• TCPA
• General Provisions continued
• Calls cannot be made with artificial voices or
  recordings to cell phones or to any service in
  which the recipient is charged for the call.
• Prerecorded or autodialed calls cannot engage two
  or more lines of a multi-line business or to any
  emergency number.
• In a related section, unsolicited advertising
  faxes are also prohibited.
• In the event of a violation of the TCPA,
  individuals are entitled to collect damages
  directly from a solicitor for 500 to 1,500 for
  each violation, or recover actual monetary loss,
  whichever is higher.

7
Laws Affecting Communication

• TCPA Limitations
• Ineffective at proactively stopping unsolicited
  calls in that the consumer had to request of each
  telemarketer to be put onto that telemarketers
  do-not-call list
• This changed as a result of the Do-Not-Call
  Implementation Acts establishment of the Do Not
  Call Registry and adoption of the National
  D0-Not-Call list by the FCC in 2003

8
Laws Affecting Communication

• The CAN-SPAM Act made a minor amendment to the
  TCPA to explicitly apply the TCPA to calls and
  faxes from outside the US.
• Portions of the TCPA related to unsolicited
  advertising faxes were amended by the Junk Fax
  Prevention Act of 2005

9
Problem Areas

• Section 227(1)(A)(iii), the TCPA prohibits using
  any automated telephone dialing system or an
  artificial or prerecorded voice to call any
  telephone number assigned to a paging service,
  cellular telephone service, specialized mobile
  radio service or any other service for which
  the called party is charged for the call.

10
How Does This Affect The Student Loan Collection
Industry

• FCC first recognized telephone calls on behalf of
  creditors to recover payments for goods and
  services are not telemarketing.
• In 2003, the FCC changed its interpretation of
  the definition of the term autodialer in order
  to limit the telemarketers use of the
  technology.
• Original intent of the TCPA and FCC regulation
  did not include credit grantors and debt
  collectors change drew the industry into the
  ban intended for telemarketers.

11
How Does This Affect The Student Loan Collection
Industry

• 1992 FCC rules that calls delivering artificial
  or prerecorded messages to residences were
  prohibited, absent the express consent of the
  called party. In the 1992 TCPA Order, the FCC
  concluded that an express exemption for debt
  collection calls to residences was unnecessary as
  such calls fall within the exemptions adopted
  for commercial calls which do not transmit an
  unsolicited advertisement and for established
  business relationships.

12
How Does This Affect The Student Loan Collection
Industry

• 1995 FCC clarified that
• - prerecorded debt collection calls are exempted
  from Section 227(b)(1)(B) of TCPA prohibiting
  prerecorded or artificial voice messages to
  residences
• -debt collection calls not directed randomly or
  sequentially generated telephone numbers do not
  require and identification message

13
How Does This Affect The Student Loan Collection
Industry

• 2003, FCC affirmed that it unlawful to make any
  call using an automatic telephone dialing system
  or an artificial or prerecorded message to any
  wireless telephone number but agreed that debt
  collection calls could be made with the following
  provisions
• In the 1992 Order the FCC determined that
  persons who knowingly release their phone
  numbers have in effect given their invitation or
  permission to be called at the number which they
  have given, absent instructions to the contrary.
• To insure that creditors and debt collectors
  call only those consumers who have consented to
  receive autodialed and prerecorded message calls,
  we (the FCC) conclude that the creditor should be
  responsible for demonstrating that the consumer
  provided prior express consent.

14
How Does This Affect The Student Loan Collection
Industry

• December 2007 the FCC clarified that autodialed
  and prerecorded message calls to wireless numbers
  that are provided by the called party to a
  creditor in connection with an existing debt are
  permissible as calls made with the prior express
  consent of the called party.

15
How Does This Affect The Student Loan Collection
Industry

• Without written prior express consent from the
  debtor there is potential for violation of the
  law
• Cell phone numbers obtained during the collection
  process cannot be dialed with a dialer
• The TCPA does not apply to land lines.
  Autodialers may be used.
• Cell phone numbers may be called if dialed
  individually the old fashioned way.

16
How Does This Affect The Student Loan Collection
Industry

• ACA Petition to the FCC
• Collectors, face potential injury from this
  uncertainty, including the risk of civil
  litigation and the risk of government enforcement
  by the Commission.
• ACA Petition to the FCC
• Limited amendment to the TCPA to preserve the use
  of autodialers to call consumers cell phones to
  recover payments for goods and services.
• Clarification of the Act is needed to indicate
  that application of the TCPA regarding use of
  autodialers by creditors and collectors has not
  changed and is needed to prevent legal action
• Further clarification of expressed prior
  consent is needed

17
How Does This Affect The Student Loan Collection
Industry Other Laws

• Fair Debt Collection Privacy Act (FDCPA)
• Privacy Protection for Consumers
• Section 808(6) Prohibits a debt collector from
  causing charges to be made to a person for any
  communication (including cell phone) if the
  collector conceals the true purpose of the
  communication. See U.S.C. Section 1692f(6).

18
How Does This Affect The Student Loan Collection
Industry-Other Laws

• Fair Debt Collection Privacy Act (FDCPA)
• Privacy Protection for Consumers (cont)
• Section 805(a) Prohibits a debt collector from
  communicating with a consumer in connection with
  the collection of any debt at any unusual time or
  place or at a time or place known or which should
  be known to be inconvenient to the consumer. The
  consumer can inform the collector that contacting
  the cell phone is inconvenient and the collector
  must cease any further communication with the
  debtor by way of the cell phone.

19
How Does This Affect The Student Loan Collection
Industry-Other Laws

• Fair Debt Collection Privacy Act (FDCPA)
• Privacy Protection for Consumers (cont)
• Section 805(c) prohibits a debt collector from
  engaging in any further communication with a
  consumer, including cell phone communication, if
  the consumer notifies the collector in writing
  that the consumer refuses to pay a debt or that a
  consumer wishes the collector to cease further
  communication with the consumer.

20
How Does This Affect The Student Loan Collection
Industry-Other Laws

• Fair Debt Collection Privacy Act (FDCPA)
• Privacy Protection for Consumers (cont)
• Section 806(5) prohibits a debt collector from
  causing a telephone to ring or from engaging any
  person in telephone conversations repeatedly or
  continuously with the intent to annoy, abuse, or
  harass any person at the called number. The
  section applies to cell phone calls as well as
  calls made to a land line.

21
What do We Do

• For the time being, focus on the idea of prior
  express permission or required authorization
  (CA)
• Obtain permission to use cell phones for contact
  purposes.
• Make sure to be complete in the verbiage of the
  statement that you are requesting the student to
  sign.
• Make sure that this happens in the admissions or
  registration process.
• Make sure that there are statements in printed
  materials indicating that you will use the number
  provided to make contact with the student.
• Work hard to accompany all receivables with a
  promissory note and written authorization

22
Cell Phone Use

• The following are statistics from the Center for
  Disease Control and Prevention that are of
  interest to what we have discussed

23
Telephone Statistics

• Preliminary results from the January-June 2008
  National Health Interview Survey (NHIS) indicate
  that the number of American homes with only
  wireless telephones continues to grow.
• Some estimates of the student loan industry
  place cell phone use at 50-60 of the portfolio
  or higher

24
Telephone Statistics

• More than one out of every six American homes
  (17.5) had only wireless telephones during the
  first half of 2008, an increase of 1.7 percentage
  points since the second half of 2007.
• In addition, more than one out of every eight
  American homes (13.3) received all or almost all
  calls on wireless telephones despite having a
  landline telephone in the home.

25
Telephone Statistics

• In the first 6 months of 2008, more than one out
  of every six households (17.5) did not have a
  landline telephone, but did have at least one
  wireless telephone
• Approximately 16.1 of all adults--more than 36
  million adults--lived in households with only
  wireless telephones
• 17.0 of all children--more than 12 million
  children--lived in households with only wireless
  telephones.

26
Telephone Statistics

• As noted, during the first 6 months of 2008,
  nearly one out of every six adults lived in
  wireless-only households. One year before that
  (that is, during the first 6 months of 2007), one
  out of every eight adults lived in wireless-only
  households. And 2 years before that (that is,
  during the first 6 months of 2005), only 1 out of
  every 15 adults lived in wireless-only households

27
Demographic Differences

• Nearly two-thirds of all adults living only with
  unrelated adult roommates (63.1) were in
  households with only wireless telephones. This is
  the highest prevalence rate among the population
  subgroups examined.
• One-third of adults renting their home (33.6)
  had only wireless telephones. Adults renting
  their home were more likely than adults owning
  their home (9.0) to be living in households with
  only wireless telephones.

28
Demographic Differences

• More than one in three adults aged 25-29 years
  (35.7) lived in households with only wireless
  telephones. Approximately 31 of adults aged
  18-24 years lived in households with only
  wireless telephones.
• As age increased from 30 years, the percentage of
  adults living in households with only wireless
  telephones decreased 19.1 for adults aged 30-44
  years 9.2 for adults aged 45-64 years and 2.8
  for adults aged 65 years and over.

29
Demographics

• Men (18.0) were more likely than women (14.4)
  to be living in households with only wireless
  telephones.
• Adults living in poverty (26.0) and adults
  living near poverty (22.6) were more likely than
  higher income adults (14.2) to be living in
  households with only wireless telephones.

30
Demographics

• Adults living in the South (19.6) and Midwest
  (17.8) were more likely than adults living in
  the Northeast (9.8) or West (13.7) to be living
  in households with only wireless telephones.
• Non-Hispanic white adults (14.6) were less
  likely than Hispanic adults (21.6) or
  non-Hispanic black adults (18.5) to be living in
  households with only wireless telephones.

31
Wireless-Mostly Households

• Among households with both landline and cellular
  telephones, 22.7 received all or almost all
  calls on the cellular telephones, based on data
  for the period January through June 2008. These
  wireless-mostly households make up 13.3 of all
  households

32
Wireless-Mostly Households

• Approximately 32 million adults (14.4) lived in
  wireless-mostly households during the first 6
  months of 2008.
• Adults with college degrees (17.1) were more
  likely to be living in wireless-mostly households
  than were high school graduates (12.5) or adults
  with less education (10.0).

33
Wireless-Mostly Households

• Adults living with children (18.1) were more
  likely than adults living alone (10.1) or with
  only adult relatives (12.8) to be living in
  wireless-mostly households.
• Adults living in poverty (10.8) and adults
  living near poverty (10.3) were less likely than
  higher income adults (17.1) to be living in
  wireless-mostly households.

34
Wireless-Mostly Households

• Adults living in metropolitan areas (15.0) were
  more likely to be living in wireless-mostly
  households than were adults living in more rural
  areas (12.1).
• Information taken from
• Blumberg SJ, Luke JV. Wireless substitution
  Early release of estimates from the National
  Health Interview Survey, January-June 2008.
  National Center for Health Statistics. Available
  from http//www.cdc.gov/nchs/nhis.htm. December
  17, 2008.

35
Information Sources

• Telephone Consumer Protection Act of 1991
• www.law.cornell.edu/html/uscode/html/uscode47/usc
  _sec_47_00000227----000-.
• ACA International www.acainternational.com
• Center for Disease Control and Prevention
• www.cdc.gov/nchs/data/nhis/earlyrelease/wireless2
  00812
• Federal Trade Commission (FCC)
• www.fcc.gov
• FCC Consumer Facts
• www.fcc.gov/cgb/consumerfacts/tcpa

36
Information Sources

• National Council of Higher Education Loan
  Programs (NCHELP)
• www.nchelp.org
• US Department of Education
• www.ed.gov

37
Questions

• Micheal Kahler
• Windham Professionals, Inc.
• www.windhampros.com
• mkahler_at_windhampros.com
• 888-747-0919
• 314-420-4876