Amendment to the Communications Act of 1934 for Government Debt Collection
On November 4th, 2015 President Obama signed into law the new congressional budget bill. The new budget deal includes a loophole to the Communications Act of 1934, which up until now has prohibited modern dialing equipment to dial cell phones for government debt collections unless the borrower has given prior consent.
RESTRICTIONS ON THE USE OF AUTOMATED TELEPHONE EQUIPMENT.– (1) PROHIBITIONS.–It shall be unlawful for any person within the United States– (A) to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice–
…(iii) to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call;
The amendment, which passed the Senate on November 3rd by a vote of 64 to 35, pertains to Section 301 Debt Collection Improvements. It adds the following:
“… unless such call is made solely to collect a debt owed to or guaranteed by the United States”
and includes a deadline “not later than nine months after the date of enactment of the Act, [the FCC] shall prescribe regulations to implement the amendments made by this section.”
The Connection Between U.S. Debt and Cell Phone Usage
The amendment passed in early November is a result of unprecedented outstanding federal student loans and consumers’ significant shift from landline to cell phone use. With U.S. debt being well over $18.5 trillion and increasing every day, the largest portion of this debt is for federal student loans, which amounts to a staggering $1.2 trillion.
The U.S. Department of Education argued in favor of the bill claiming that student loan servicers would be able to assist more borrowers to better meet their payment due dates if they could be reached on their cell phones. According to a report released by the National Center for Health and Statistics in 2014, by the latter half of 2013, 41% of homes in the United States had wireless phones only – no landlines. 33.6% of households that used both landlines and wireless phones received the majority – if not all – of their calls on their wireless cell phones.
With more contact being utilized via cell phone, there also comes the challenge for debt collection agencies and loan servicers to track down recent college graduates who often move to new cities, states or countries for potential jobs. Many graduates choose not to pay for a landline at their new location in addition to their cell phone. Because they already use the cell phone as their main point of contact, the additional monthly cost for a landline – telephone communication wouldn’t make sense.
The change in technology and mobile driven communication has an impact not only on student loan debt, but also on all debt collection types. The move from landline to cell phone creates a ‘Catch 22’ for other debt type businesses, who at this time, do not have the appropriate approved regulation to use modern dialing technology like the U.S. Government who can now call with cell phone communication.
The Department of Education’s Debt Collection Agencies
Debt collection agencies and loan servicers, such as Nelnet (one of the department’s biggest loan servicers), have lobbied the Federal Communications Commission (FCC) to exempt student loans from the Telephone Consumer Protection Act (TCPA). In 1991, the TCPA amended Title II – Section 201 of the Communications Act by adding Section 227, thus prohibiting the use of automatic dialing systems to contact borrowers on their mobile phones without their consent.
Nelnet wrote to the FCC insisting that borrowers who consented to being called via an autodialer had a better chance of avoiding late payments. Of course, there is theory in this statement that since the government pays Nelnet and its other loan servicers (Navient and American Education Services) millions of dollars based on their performances, the insistence is pushed on the government’s behalf to prove the results they want.
Predicting Future Amendments to the TCPA
Having discussed how many people only use, or primarily use, their cell phones along with the reasonable assumption that consumers’ landline use will continue to dwindle, it would not be a surprise if other legitimate businesses that collect debts would lobby for their chance to contact consumers’ phones using predictive dialers as well. ACA International is and continues to be a large lobbying force for the ARM industry who also has filed joint brief in this challenge on the TCPA circuit.
As it’s already approved for government debt collections to use modern dial technology to run their business to collect money, other debt collection businesses could easily make an argument similar to that of the department’s student loan services’ that they could help borrowers comply with their due dates at a higher percentage rate if the caller could reach them on their cell phones.
Overall we’ve seen that there has been a significant impact on the use of dialing technology for debt collection with current rulings such as this congressional budget bill and the FCC Ruling in July 2015. The importance of this bill sent into law by President Obama is the approval of modern dialing technology for government debt collection, but not for other debt type collections at this time. It seems more and more often that Laws are becoming antiquated as technology changes at a much faster pace. There could be a likely outcome of this amendment spilling over for all businesses collecting debts to be able to contact consumers’ on their cell phones by the time landline usage has reached obsolescence, and the TCPA will have to evolve with new amendments to protect borrowers’ telephone protection rights in more efficient ways.
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