Debt Collection Information Age

8/9/2019 Debt Collection Information Age

1/34

Debt Collection in the Information Age:New Technologies and the Fair Debt

Collection Practices Act

Colin Hector*

Debt collectors are increasingly using internet and mobiletechnologies as part of the debt collection process. While thesetechnologies may provide conveniences for collectors and consumersalike, they also create the potential for new forms of deception andraise novel privacy concerns. Much of the problem lies in the failureto update the Fair Debt Collection Practices Act (FDCPA). Despitethe dramatic transformation of the debt collection industry over thelast thirty years, the statute has remained largely backward looking

even in the face of calls to modernize the act from regulators,industry representatives, and consumer advocates.

Recently, this landscape has undergone a fundamental change.Congress vested the new ly created Consumer Financial ProtectionBureau (CFPB) with rulemaking authority over the FDCPA. Thismarks an opportunity to address the pressing problems raised by debtcollectors use of new and emerging technologies, and to provideguidance regarding what protections are necessary in order topreserve consumer privacy and prevent harassment. In some cases,

the challenges raised by new technology can be sufficiently resolvedthrough the current FDCPA framework while in other areas, reformis sorely needed.

This Comment outlines the challenges new technologies pose,analyzes the areas of tension that cannot be resolved under thecurrent FDCPA framework and recommends three areas of reform.First the term comm unication should be redefined in order to

Copyright 2 11 Califomia Law Review, lnc, Califomia Law Review, Ine, CLR) is aCalifomia nonprofit corporation, CLR and the authors are solely responsible for the content of


2/34

1602 CALIFORNIA LAW REVIEW [Vol. 99:1601

ensure that the FD CPA s disclosure requirement is adequatelyapplied to new comm unication platforms that pose a threat toconsumer privacy. Second the CFPB should reform the FDCPA toensure that new communication technologies do no t become a one-way street, by requiring that communications made through newtechnologies include necessary disclosures, an opt-out mechanism,and a dispute process that consumers can use through the sametechnology that the debt collector used to contac t the consumer. Andthird the CFP should consider imposing an express written consentrequirement on the use of technologies that m ay cause consumersfinancial harm.

Introduction 1602I. A Brief Background on the FDCPA & the Debt Collection IndustryA. Legislative Background 16B. General Principles Guiding Judicial Interpretation ofthe

FDCPA 1607C. The Growth ofthe Debt Collection Market D. The Current FDCPA Regulatory Landscape and New

Technologies 1610II. Case Law Applying the FDCPA to New Technologies

A. Voicemails Under the FDCPA 1B. Deceptive Uses of Technology Under the FDCPA

III. Applying the FDCPA Framework to New Technologies: IdentifyinAreas of Reform 162A. Communications with Putative Debtors B. Information Gathering 162

IV. Recommended Changes and the Challenges of Reform A. Textual Clarification ofthe Term Com munication

B. Additional Requirements for the Use of Intemet and MobileTechnologies 1628C. Express Written Consent Requirement for New Technologi

That May Cause Consumers Financial Harm Conclusion 1633

INTRODUCTION

On July 20, 2010, a friend of Melanie Beacham, Florida residenWilson, received an unexpected message through his Facebook accouman who identified himself as Jeff Happenstance. ' The messastraightforward and asked Wilson to [p]lease [h]ave Melanie D Beac


3/34

2011] DE T CO LLECTION IN TH E INFORMATION AGE 1603

would relay Happenstance's request, but noted that since Beacham had her ownFacebook account, it would be simpler for Happenstance to contact her directly.^

Happenstance thanked him for the reply, and did not message W ilson again.''One month later, Beacham received a Facebook message from a person

identifying himself as Loxley Dufis. ^ In contrast to the message sent byHappenstance, Duffus's message was much more pressing. The message statedthat there was an [u]rgent matter, provided a phone number to call, and askedBeacham to contact Supervisor Duffus at MarkOne by 6 p.m. that day.*

Both of these messages were from a debt collector, and were aimed atinducing Beacham to repay a $362 car loan.^ But instead of prompting a quick

repayment, the unwanted online contacts led Beacham to file a civil suit instate court, alleging violations of state debt collection laws and intentionalinfiiction of emotional distress.^ Beacham's suit, filed on August 26, 2010,marked the first time a debt collector had been sued based on a series ofFacebook messages.'

While Beacham's suit may be the first, it almost certainly will not be thelast. A growing number of similar lawsuits and media stories reveal that debtcollectors are increasingly tuming to emerging technologies as a way to collectpayments on defaulted debts. * In one case, a debt collector attempted tointimidate a putative debtor by saying that she had seen a picture of theconsumer's beautiil daughter on the consum er's MySpace webpage . Inanother example, a Chicago lawyer reported that a young woman in a bikini

3. Id .4 . Id .5. See Motion to Amend for Punitive Damages, Ex. A at 1, Beacham v. MarkOne Financial,

LLC, No . 10-12883CI-15 (Fla. Pinellas Cnty. Ct. Nov. 18, 2010) [hereinafter Beacham Motion to

Amend] .6. Id .

1. Alexis Madrigal, Faceboo k Warns Debt Collectors About Using Its Service ATLANTICMONTHLY, NO V. 19, 2010, available at http://www.theatlantie.eom/technology/archive/10/ll/faeebook-wams-debt-collectors-about-using-its-service/66831.

8. Com plaint at 3, Beacham v. MarkO ne Financial, LL C, No . 10-12883CI-15 (Fla. PinellasCnty. Ct. Aug. 26, 2010). The complaint in Beacham was filed before the debt collector directlycontacted the plaintiff Thus, the complaint only contained allegations arising from the debt collector'sonline contacts with the plaintiffs friends. See id . at 2-3. Later filings made additional allegationsarising out of the debt collector's direet contacts with the plaintiff See Beacham Motion to Amend,supra note 5, at Ex. B, 3-5.

9. See Alexia Tsotsis, Facebook Debt Cottection Case Is Deflmitely a First TECHCRUNCH(Nov. 19 ,2010 ), http://techcrunch.eom/201 0/l 1/19/debtbook.10. See, e.g.. Madrigal, supra note 7; R enee C. Lee, Got Debt? Better Watch What You Post


4/34


had friended his client on Facebook.'^ The account tum ed out to be a debtcollector, who posted a message on the client's wall: Pay your debts, yo

deadbeat. In yet another instance, a consum er alleged that a debt collectorplaced a message on his daughter's M ySpace w ebpage, demanding that tdaughter contact the debt collector and wam ing her that [f]ailure to comwith this notice of surrender is a class 5 felony and carries a maximum penaof imprisonment for two years plus all applicable surcharges. ''*

Debt collectors' use of new communication mediums is not limited to use of social networking websites. For example, debt collectors have also bexperimenting with ways to integrate e-mail and mobile phone text messag

services into their overall collection strategy.'^ One company that offers dcollectors a system to contact putative debtors claims that when one top-tsub-prime mortgage lender added text messaging to their existingcom munications efforts, the lender saw increased paym ent rates by nea100% within five days of contact... . '* Despite the potential effectiveness new technologies, industry insiders have advised collectors to use caution inemploying new technologies in order to avoid lawsuits like the one broughtMelanie Beacham.'^

Applying the main federal law conceming debt collection practicestFair Debt Collection Practices Act (FDCPA)to debt collectors' use of ntechnologies is a challenging endeavor. C ongress passed the FD CPA in 197well before the advent of e-mail, intemet, m obile, and voicemail techno logieIn enacting the FDCPA, Congress gave no agency the power to promulgm ies to clarify and update the la w . Thus, the provisions oft he FDC PA haremained largely unchanged over the last thirfy years.^

12 . Debt Collector Accused of Facebook Harassm ent ARIZ. REPUBLIC, Nov. 19, 2010,http://www.azcentral.comyoffbeat/articles/2010/l 1/18/20101118facebook-debt-collector-harrassment.html.

13. Id.14. Complaint at 2, Ricob ene v. JP Mo rgan Ch ase Bank , No . 09-cv-2903 (N.D . 111. M ay 1

2009).15 . See W illiam How ard, consu me r protection attorney. Draft Transcript, Debt Collection 2.0:

Protecting Consumers as Technologies C hangeat 245 (Apr. 28, 2011 ) [hereinafter Draft Transcript,Debt Collection 2.0], available at http://www.ftc.gov/bcp/workshops/debtcollectiontech/docstranscript.pdf ( People used to be shocked when they were getting text messages, and now that 's just away that, you know, debt collectors collect debts ).

16 . Billing Collection X T X T E X T, http://xtxtext.com/SMS_Industries.html#billing

Collection_title (last visited Aug. 18, 2011); see also Jeff Sovem, Debt Collection via Text Messages?C O N S U M E R L AW & P R O T E C T I O N B L O G (Feb. 3, 20 10, 2:02 P M), http://pubcit.typep ad.com/c lpb log/

2010/02/debt collection via text messages html (discussingthe F D C PA and text mes saging debt


5/34

2011] DE T CO LLECTION IN THE INFORMATION AGE 1605

This regulatory landscape has dramatically changed with the recentcreation of the Consumer Financial Protection Bureau (CFPB). By vesting the

CFPB with the power to clarify and modify the FDCPA, Congress established aworkable way to modemize the federal law that govems debt collectionpractices. In light of this new rulemaking power, the CFPB should considerreforming the FDCPA in order to address the concems related to the growinguse of n w technologies as part of the debt collection process.

This Comment explores how the CFPB can reform the FDCPA to addressthe concems that debt collectors' use of new technologies raise. Specifically,the use of these technologies presents two major areas of concem. First, newtechnologies allow for new types of deceptive debt collection activities. Forexample, modem technologies offer new ways for debt collectors to disguise ormask their identities while collecting information. Second, since consumershave different expectations of privacy regarding mobile and intemettechnologies, debt collectors' use of new communication mediums raisesunique privacy concems. In some cases, such as the use of n w technologies tosurreptitiously collect information about a putative debtor, the current FDCPAframework is flexible enough to address many of the problems that newtechnologies pose. However, in other contexts, such as the use of intemet and

mobile technologies to directly contact consumers, new technologies raiseprivacy concems that are not easily resolved under the FDCPA.The CFPB should reform the FDCPA in three ways in order to ensure that

consumers are adequately protected against the abusive practices Congresssought to alleviate. First, the CFPB should revise the FDCPA's definition of communication to reflect the privacy concems that debt collectors' use ofnew technologies raise. Second, the CFPB should ensure that new technologiesdo not become a one-way street, by requiring that contacts through newtechnologies contain a disclosure, a mechanism that allows consumers todispute the alleged debt, and a simple way to opt-out of iture com munications.Finally, the CFPB should consider requiring that debt collectors receive priorwritten consent before using certain technologies to contact consum ers.

This Comment proceeds in four parts. Part I provides a basic backgroundof th FDCPA and the current state of debt collection. Part II analyzes case lawthat applied the FDCPA to technologies that Congress did not contemplatewhen passing the FDCPA. Part III presents some of the challenges newtechnologies pose, and identifies areas that courts cannot resolve easily under

the current FDCPA framework. Part IV analyzes the obstacles in crafting a


6/34


regulatory response to debt collectors' use of new technologies and discusthree potential changes to the FDCPA.

I.A B R I E F B A C K G R O U N D O N T H E FDCPA T H E D E B T C O L L E C T I O N IN D U S T RY

Examining the statutory and legal background of the FDCPA provides important backdrop to the regulatory challenges new technologies present. TPart begins by discussing the goals that Congress sought to fiirther throuenacting the FDCPA in 1977. Next, it examines the approach courts have takin interpreting the provisions of the FDCPA. It then outlines the rece

explosive growth of the debt collection industry before ending with discussion of the current regulatory landscape regarding new technologies adebt collection.

A Legislative Background

The FDCPA was passed in 1977 in order to prohibit abusive, harassinand deceptive debt collection methods. In enacting the FDCPA, Congresought to fiirther two main policy goals. First, Congress intended to protconsumers from a host of egregious debt collection practices.'^' SeconCongress sought to remove the incentive to engage in certain debt collectipractices so that ethical debt collectors would not suffer a competitidisadvantage.^^

Congress viewed irthering these twin goals through federal legislation an appropriate and necessary response to the patchwork of state laws regulatdebt collection practices. When Congress enacted the FDCPA, thirteen stahad no debt collection laws, and an additional eleven states had wholineffective laws regulating third-party debt collections.^^ Reacting to th

regulatory landscape, the FDCPA made it unlawil for debt collectors in evestate and the District of Columbia to engage in certain practices, includincontacting consumers at inconvenient times and places;^'' failing to ceacommunication upon written request;^' making spurious threats of legaction; using abusive or profane language;^^ and comm unicating with putatdebtors without meaningfiil disclosure,^^

These prohibitions were primarily aimed at ensuring adequate protectifor consumers,'^' Consistent with this remedial purpose, the FDCPA provid

21,22,

See S, REP, N o, 95-382, at 1-2 (1977),Id


7/34

2011] DEBT CO LLECTION IN THE INFORMA TION A GE 1607

consumers with a private right of action against debt collectors who engunlawfril collection tactics. In addition, the FDCPA is generally a

liability statute, which allows a consumer to hold a debt collector liable wshowing that the collector intended to violate the FDCPA.^' Taken togthese elements of the FDCPA created a powernil remedy that consumers couassert against aggressive collectors.

The protections afforded by the FDCPA were also intended to removeconomic incentive debt collectors had to engage in abusive practices. time Congress enacted the FDCPA, it recognized that the commission-model of debt collection too often created the incentive to collect bmeans. '''^ By prohibiting certain practices. Congress wanted to ensur debt collectors who refrain from abusive debt collection practices arcompetitively disadvantaged. ... Thus, Congress sought to guaranteeunscmpulous debt collection practices would not adversely affect econsumers or ethical debt collectors.

B. General Principles Guiding Judicial Interpretation ofthe FDCP

In line with the consumer protection goal of the FDCPA, courts intethe provisions ofthe FDCPA liberally, in favor ofthe consumer.^'' Accordto determine whether a collector has violated a specific provision oFDCPA, courts generally apply a least sophisticated consumer tesopposed to a reasonable consumer standard.^^ The least sophisticconsumer test is based on the notion that consumers of below-avesophistication or intelligence are especially vulnerable to frauduschemes. ^* Hence, this standard ensures the protection of ll consumers, eventhe naive and the tmsting, against deceptive debt collection practices. ^^

Under this test, the question is whether a debt collector's activity w

mislead or deceive the least sophisticated consumer.'' To make

30. See 1692k.31. Russe ll V. Equifax A.R .S., 74 F.3d 30 , 33 (2d Cir. 1996); .fee also Jerman v. Carlisle,

McN ellie, Rini, Kramer & U lrich LPA, 130 S. Ct. 160 5,16 11-25 (2010) (holding that errors ofnot qualify as good faith mistakes for the purpose ofth e FD CP A's bona fide error defense).

32. See S. REP. 95-382 , supra note 2 1, at 2.33. 15 U.S.C. 169 2(e).34. See, e.g.. Brown v. Card Serv. Ctr., 464 F.3d 450, 453 (3d Cir. 2006) ( Because

FDCPA is a remedial sta tu te ,. .. we construe its language broadly, so as to effect its purpose .Johnson v. Riddle, 305 F.3d 1107, 1117 (10th Cir. 2002) ( Because the FDC PA . . . is a remstatute, it should be construed liberally in favor o fthe consum er. ); Blair v. Sherman A cquisitio04-CV-4718, 2004 WL 2870080, at *2 (N.D. 111. Dec. 13, 2004) ( Beeause it is designed to protect


8/34


determination, courts look at the impression that a debt collection activity islikely to leave on a consumer who lacks the astuteness of a 'Philadelphia

lawyer' or even the sophistication of the average, everyday, commonc o n s u m e r. . . . ^' However, wh ile affording protection to all consumers, the least soph isticated standard also provides some assurances to debt collectioncom panies. The least soph isticated consum er, wh ile lacking the acumen average consumer, is still presum ed to possess a mdimentary amount of infor-mation about the world and a willingness to read a collection notice with somcare. ' ' Thus, while the judiciary's general approach towards FDCPA vtions explicitly protects nave consumers, it also shields debt collectors again

liability for bizarre or idiosyncratic interpretations of collection notices. ^

C. The Growth ofthe Debt Collection M arket

When Congress enacted the FDCPA, debt collection was already asubstantial business enterprise. The legislative history of the FDCPA notes thatin 1976, companies tumed over five billion dollars in debt to the approxim atelyfive thousand collection agencies across the country. *^ W ith respect toservicing these debts, one trade association that represented approximatelof the independent debt collections operating in the United States estimateits members contacted eight million consumers in 1976.''

In recent years, the debt collection industry has experienced explosivegrowth, which followed an enormous increase in credit card debt. A ccording toFederal Reserve statistical reports, the amount of revolving consumer credialmost all of which is from credit cardsrose from $273 billion in September

(applying least sophisticated constuner test to false or tnisleading representations ttnder the F DC PABrown 464 F.3d at 454 ( [A]ny lender-debtor co mm unications potentially giving rise to claims underthe FDCPA . . . should be analyzed from the perspective of the least sophisticated debtor. ). TheSeventh Circuit has adopted an unsophisticated co nsum er standard that serves a similar purpose ,while not being tied to the very last rung on the sophistication ladder. Gatnm on v. G.C. Servs. Ltd.P'ship, 27 F.3d 1254, 1257 (7th Cir. 1994).

39 . Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. 1996)40. Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993); see also e.g. Drossin v. Nat ' l

Action Fin. Serv., Inc., 641 F. Supp. 2d 1314, 1317 (S.D. Fla. 2009) ( Courts may assume, however,that the least sophisticated eonsum er will possess a rudimentary amount of information about theworld and will not mak e unreasonable misinterpretations. ) (intemal quotations om itted).

41 . Gionis V. Javitch, B lock, R athbon e, LLP, 238 F. App 'x 24, 28 (6th Cir. 2007 ) (quotingGlomon 998 F.2d at 1320) (intemal quotation marks omitted); see atso Grden v. Leikin, Ingbert &

Winters, P.C., No. 09-10579, 2010 WL 199947, at *3 (E.D. Mich. Jan. 19, 2010) ( [A]lthough thisstandard protects nave consumers, it also preve nts liability for bizarre or idiosyncratic interpretationsof collection noticesby preserving a quotient of reasonablenessand prestiming a basic levelof


9/34


1992 to $973 billion in September 2008.'*' As the amount of unsecured creditcard debt has risen, so have the default rates on credit card payments. Althoughcredit card delinquency rates averaged about 4 percent from 1991 to 2007,'**this rate increased to a peak rate of 6.75 percent in the second quarter of 2009,before retuming to between 4 and 5 percent in the last half of 2010.'*'

Increasing consumer debt laid the foundation for the growth of the debtcollection industry. In 2006, third-party debt collectors received $10 billion inrevenues, and law firms specializing in debt collection received around 1.2billion.'** In servicing outstanding debts, industry representatives estimate thatthird-party debt collectors make more than one billion contacts with consumers

each year.'*' Underscoring the prevalence of debt collection as part of theAmerican economy, researchers at Ohio Universify conducted a recent surveyin which nearly half of the respondents reported that they had received atelephone call from a debt collector.^

Debt collection contacts have been the source of an enormous number ofconsumer complaints. The number of complaints that the FTC has receivedregarding debt collection has increased dramatically over the last decade,growing by 34 percent from 2004 to 2008.^' Consistent with this trend, in 2009the FTC received 88,190 complaints conceming debt collection practices, aconsiderable increase from the 78,925 complaints received in 2008. ^ The 2009complaints against third-parfy debt collectors represented 16.8 percent of thetotal number of complaints the agency received, making debt collection theindustry that received the most consumer complaints.'^

45 . Federal Reserve, Consu mer Credit Historical Data, http://ww w.federalreserve.gov/releases/gl9/hist/cc_hist_sa.html (last visited Aug. 5, 2011) (seasonally adjusted). Since 2008 , theamount of revolving consumer debt in the United States has gradually declined. In July 2011,revolving consumer debt was estimated at $792 b illion. Id

46. U.S. Gov'T ACCOUNTABILITY OFFICE, GAO-09-748, CREDO- CARDS: FAIR DE B TC O L L E C T I O N P R A C T I C E S AC T C O U L D B E T T E R R E F L E C T TF IE E V O LV I N G D E B T C O L L E C T I O N

MARKETPLACE AND USE OF TECHNOLOGY 4 (2009) [hereinafter GAO FDCPA R E PO RT] .

47 . Federal Reserve, Charge-Off and Delinquency Rates for All B anks, http://www .federalreserve.gov/releases/chargeofdelallsa.htm (last visited A ug. 5,20 11) (seasonally adjusted).

48. GAO FDCPA REPORT, 5pra note 46, at 6.49 . Id at 35 .

50. N AT ' L C O N SU M E R LAW CTR., INC., THE D E B T M A C H I N E : HO W THE C O L L E C T I O NINDUSTRY HOUNDS CONSUMERS A N D OVE RW HE LMS COU RTS 5-6 (2010) (citing Scripps SurveyResearch Center pollof 1,001 respondents com pleted Sept.26, 2009 and posted at http://www.


10/34

1610 CALIFORNIA LAW REVIEW [Vol. 99:160 1

D. The Current FDCP Regulatory Landscape and New Technologies

When Congress passed the FDCPA in 1977, it gave no agency the powerto issue additional mies and regulations to govem the practices of third-partydebt collectors.^ * Consequently, revising the FDCPA has been a difficultprocess because the only route to change has been through Congress.^'Notably, the only recent major amendments to the FDCPA^passed as part ofthe Financial Service Regulatory Relief Act of 2006came after considerablelobbying by the collection industry. *

As a result of the FDCPA's largely static nature, the law has not kept pacewith new technologies, a fact that regulators and industry representatives have

strongly criticized. The Federal Trade Commission (FTC), the govemmentagency entrusted with enforcing the FDCPA, recently concluded that [t]oprovide more certainty to the industry and to protect consumers from harm .. .debt collection law needs to be modemized to take account of today's newcommunication technologies. The Commercial Law League of America,which represents the collection industry, has similarly concluded that [t]hefailure of Congress to modemize the FDCPA presents substantial problems forboth debt collectors and consumers. ^^ Although consumer advocates have alsorecognized the tension between the FDCPA and the growth of newtechnologies, they have voiced the fear that opening up more technologies just

54. 15 U.S.C. 16921(d) (2006). The legislative history of the Act sug gests that the relevantCommittee felt that the FDCPA was comprehensive and would fully address debt collection abuses. S.REP. NO. 95 -382, supra note 21, at 6 (1977).

55 . Se e GA O FDCPA REPORT, supra note 46, at 49-5 0 (recomm endng that Congress provdethe FTC w th FDCPA rulemaking authority).

56. Jennifer W. Loon, Congress Passes Three EDCPA Amendments COLLECTOR, Nov. 2006,available t http://fmdartcles.com/p/artcles/m qa5315 /s_200611/a_n21 403197 . Passed as part ofthe Fnancial Service Regulatory Relief Act of 2006, Pub. L. No. 109-251, the three amendments: i)clarified that a formal pleading is not subject to the initial comm unication disclosure requrements;(i) clarified that certan notces that do not seek payment of a debt are not subject to the nitialcommunication disclosure requirement; and (ii) clarified that debt colleetors are permitted to engagin eoUection activities during the thirty-day period n whch a putatve debtor is entitled to obtainverifieation for a disputed debt. 15 U.S.C . 1692g(b), (d) & (e). In addition, as part of the same actthe FDCPA was amended to exclude certain bad cheek enforcement firms 'om the scope of theFDC PA. 15 U.S.C. 1692p. Some consumer advocacy groups strongly critcized this exeluson. Seee.g.. Public Citizen NCLC Call on Congress Not to Exempt Abusive Debt Collectors From Consumer

Protection Law (M ay 2, 200 6), PUBLIC CITIZEN, http://w ww .citizen.org /pressro om /pressro om redirectcfin?ID=2193.

57 FTC C O L L EC T I N G C O N S U M E R D E B T S : THE C H A L L E N G E S OF C H A N G E 36 2009)


11/34


gives [debt collectors] more avenues to harass . . . embarrass . . . and cause[consumers] problems at work . , . . ^^

The recent creation of th Consumer Financial Protection Bureau (CFPB),marks a new opportunity to address the concems regarding the FDCPA andnew technologies. The Consumer Financial Protection Act of 2010, whichestablished the CFPB, vested the new bureau with the power to promulgatemies clarifying and amending the FDCPA.* This mlemaking power presents aworkable, promising path to reforming the FDCPA so it may better reflect thetechnological developments that have taken place over the last thirty years.Indeed, in outlining a suggested agenda for the CFPB, the nonprofit advocacygroup Consumers Union identified exercising the new power of FDCPA

mlem aking as a priority.*'Taken together, this background provides compelling reasons for

considering how the CFPB can reform the FDCPA to better reflect newtechnologies. Organizations have argued that without clearer guidance, the useof new technology may beeome a challenging process , with regulatorycompliance a guessing game, rather than a predictable endeavor. *^ This hasthe potential to create a race to the bottom by incentivizing aggressivecollectors to take advantage of this legal gray area in ways that jeopardize the

welfare of consumersexactly what Congress sought to avoid.*^ Sueh a resultwould severely undermine the policy goals of the FDCPA by encouragingunscmpulous debt collectors to utilize new technologies to deceive and harassputative debtors, thereby harming consumers and placing ethical collectors onan uneven playing field.

II.CASE LAW APPLYING THE FDCPA TO NEW TECHNOLOGIES

Although courts have touched on the use of intemet and mobiletechnologies by debt collection companies, no deeision has squarely addressedthis issue. Two areas of litigation, however, provide some guidance forapplying the FDCPA to new technologies. First, cases applying the FDCPA to

59, Transcript of C hallenges of Change W orkshop at 163 (Oet, 10, 2007) (remarks of LaurenSaunders, Managing Attomey, National Consumer Law Center), available at http://www,fte,gov^ep/workshops/debteolleetion/FTC_DebtColleet_071010,pdf

60, See Consum er Financial Proteetion Aet of 2010, Pub, L, No, 111-205, 1002(12), 1022,61, See Protecting Our Wallets: Consumers Union Recommends Priority Areas for the

Consum er Financial Protection Bureau s First Y ear, CONSUMERS UNION (Oet, 6, 2010, 9:43 AM),http://www,defendyourdollars,org/2010/10/the_efpb_ean_solve_consumerj5r,html,

62 S GA O FD CPA REPORT 46 49 ( i l f ACA


12/34


voicem ails left by debt collectors reveal that courts have not diminished fedprotections in order to accommodate new communication technology.

addition, these cases suggest that courts should consider the practical effectstechnology in applying the FDCPA to different communication platformSecond, decisions addressing the use of new technologies by debt collectorsdeceive consumers reveal that some provisions of the FDCPA may be fiexienough to extend to these technologies.

A. Voicemails Under the FD CPA

Litigation over debt collection voicemails delivered to answerimachines demonsfrates some of the potential difficulties in applying tFDC PA to new technologies. Although the underlying technology of answermachines had been developing since the eariy 1900s, it was not until the 19that the device became widely used in residential homes.*'' Consequently, whplaintiffs began alleging FDCPA violations arising out of voicemails placed debt collectors, the courts had to apply the FDCPA to a technology that was specifically contemplated at the time ofthe law's enactment in 1977.

Courts that have applied the FDCPA to voicemails have routinely facthe issue of whether voicem ails are com m unica tions that are subject to FD C PA 's disclosure requirements. The FDC PA defines com mu nication the conveying of information regarding a debt directly or indirectly to aperson through any medium. *' In tum, the FDCPA requires that in an initcom munication with a putative debtor, debt collectors must disclose that debt collector is attempting to collect a debt and that any information obtainwill be u sed for that purpose. ** The law also requires debt co llectors disclose in subsequent communications that the communication is from a dcollector. In response to claims that voicem ails require these disclosures, dcollectors have argued that voicem ails do not constitute com municationbecause they do not convey[] . . . information regarding a debt directly indirectly to any person . . . . *^

The vast majority of courts that have addressed this issue have held thvoicemails are communications that are subject to the FDCPA disclosuprov isions. These courts, how ever, have employed different reasoning reach this conclusion. Although courts have not provided a clear-cut framewofor approaching voicemails under the FDCPA, three elements appear to

64 . D AV I D M O R T O N , O F F T H E R E C O R D : T H E T E C H N O L O G Y A N D CULTURE O F S O U N D

R E C O R D I N G IN A M E R I C A 134 2000).


13/34


particularly important in determining whether a voicemail is a communication. First, courts have relied on the content of the voicemail

message. Second, courts have looked to the practical consequences ofexempting certain voicemails from the ambit of the FD CPA . Finally, courtshave looked to the context in which the voicemail was

With respect to the content of voicemails, many courts have found thatvoicemail messages containing even minimal information related to a debt are comm unications under the FDCPA.'^ For instance, in Hosseinzadeh v. MRSAssociates the plaintiff brought suit against the defendant debt collector basedon a series of voicemails referring to a very important matter. ^'' The messagesrequested that the consumer call back a specified toll-free number, and wamedthat failure to call the number would result in a decision-making process that[the consumer would] not be a part of ^^ The court found that although themessages may not have technically mentioned specific information about adebt or the nature ofth e call, the indirect references to the debt were sufficientto bring the messages under the FD CPA's definition of communication. ^*

Other courts have emphasized the pragmatic concem that exemptingcertain voicemails from the FDCPA would allow debt collectors to circumventstatutory requirements by repeatedly contacting debtors with messages

containing minimal content.^^ In Ramirez v. Apex Financial Management LLCa debt collector had left several messages on a consumer's answering machineafter receiving a written cease and desist letter. ^ Although the FDCPAgenerally requires that debt collectors cease further comm unication afterreceiving such a letter,'^ the defendant argued that the voicemails were not

70. See infla notes 74-77 and aeeompanying text.71. See infla notes 77-82 and accompanying text.72. See infla notes 83-84 and accompanying text.73. See, e.g. Edwards v. Niagara Credit Solutions, Inc., 586 F. Supp. 2d 1346, 1350-51 (N.D.

Ga. 2008) (finding that a voicemail instructing the listener to retum the call in order to discuss an important matter indirectly eonveyed information about the debt) , affd on other groun ds 584 F.3d1350 (11th Cir. 1009); Costa v. Nat'l Action Fin. Servs., 634 F . Supp. 2d 1069, 1076 (E.D. Cal. 2007)(finding that a voicemail conveying the fact that there w as a matter that she should attend to andinstructions on how to do so was a communication under the FDCPA because it indirectly eonveyedinformation regarding a debt); Berg v. Merchants Ass'n Collection Div., Inc., 586 F. Supp. 2d 1336,1340-4 1 (S.D. Fla. 2008) ( Courts generally consider pre-recorded messages and voice mail messagesfrom debt collectors to be 'eommunications,' even if the messages do not state what the calls areregarding. ).

74. 387 F. Supp. 2d 1104 (C D . Cal. 2005).75. / a t 1107-08.76. Id. at me.

d


14/34

1614 C LIFORNI LAW REVIEW [Vol. 99:1601

communications because the messages did not clearly convey informationregarding a debt. The court rejected this argument, observing that under the

defendant's interpretation of the FDCPA, debt collectors would be able tocontinue to leave messages after receiving a cease and desist letter so longas they avoid mentioning the underlying debt, which would absolve them of

liabilify. Drawing on the legislative purpose of the FDCPA to protectconsumers from debt collectors' harassing conduct, the court concluded thatexempting messages that lack specific content would be in grave conflict withthe standards that underlie the FDCPA. ^^

A third element that courts have relied on in determining whether

voicemails are communications is the context and purpose of the message.^^Courts have found that a voicemail's function as part of the overall debtcollection process militates in favor of finding that the message is a comm unication under the FDCPA. For instance, in Hutton v. C.B. AccountsInc. the court found that a series of voicemails left by a debt collector were com munications in part because the purpose ofthe messages was to inducePlaintiff to call Defendant to discuss her outstanding debt. ^ *

The precise standard employed in these decisions is often unclear, andcourts commonly provide multiple reasons for concluding that a particularvoicemail is actionable under the FDCPA. For example, in Foti v. NC OFinancial Systems which has become the most prominent of the FDCPAvoicemail cases, the court drew on several different lines of reasoning infinding that the voicemail at issue was an FDCPA communication. ^^ Theseincluded: (i) the content of the voicemail, including the suggestion that therewas a matter requiring immediate attention and the provision of a call-backnumber; (ii) the obvious purpose of the message to entice a retum call; (iii)the broad purpose of the FDCPA to protect consumers; and (iv) the concem

that exempting voicemails would provide debt collectors with a loophole tocircumvent protections afforded by the FDCPA.^^ Although these differentfactors provide a variefy of justifications for concluding that such a contact is a communication under the FDCPA, they do not set forth a clear fi-ameworkthat courts can easily apply to other contexts.

80. Ramirez 567 F. Supp. 2d at 1040-41.81. . a t 1042.

82. Id83 . See, e.g. Hutton v. C.B. Accounts, Inc., No. 10-3052, 2010 WL 3021904, at *2 (N.D. III.Aug. 3 , 2010) ( Determining whether something is a 'communication' under the FDCPA involves


15/34

2011] DE T C OLLECTION IN THE INFORMATION AGE 1615

Conversely, at least two courts have reached a confrary result, agreeingwith the defendant debt collectors and finding that challenged voicemails were

not communications tinder the FDCPA because they did not convey any information regarding a debt. ^' These cases focused primarily on the contentof the voicemail and involved voicemails that contained only a name and arequest for a retum call.^^ In concluding that such voicemails were notactionable under the FDCPA, these cases did not address the other elementsupon which other courts that treated voicemails as com munications relied. Asa result, other courts have widely criticized these cases.^^ Despite this criticism,these decisions highlight the confusion over determining how to apply theFDCPA to new technologies.

While the voicemail cases do not establish an unassailable framework forapplying provisions of the FDCPA to new technologies, they do provide twohelpftil guidelines for approaching new technologies. First, the voicemail casesdemonstrate that the protections afforded by the FDCPA should not bediminished because the law makes it difficult or impossible for collectors to usea particular technology. The three main elements considered in the FDCPAvoicemail casesthe content of the voicemail, the concem that exemptingvoicemails would create a loophole in the FDCPA's protections, and the

context of the voicemailall focus on whether applying the FDCPA to avoicemail will ensure an adequate level of consumer protection.Notably, none of these cases look to balance the interest of debt collectors

in using new technologies against the consumer protections the FDCPAendows. Indeed, a common argument debt collectors have made in these caseshas been that requiring collectors to disclose their identity in voicemailmessages places the collectors in an untenable dilemma.'*' Collectors have

87. See Biggs v. Credit Collections, Inc., No. CIV-07-0053-F, 2007 WL 4034997, at *4 (W.D.Okla. No v. 15, 2007) (findng that a vocemail that identified the name of the caller and asked theputative debtor to call a provded number was not a eommunication under the FDCPA); Koby v. ARSNat'l Servs., hic. No. 09-cv-0780, 2010 WL 1438763, at *4 (S.D. Cal. Mar. 29, 2010) (finding that avocemail that identified the ealler's name and requested a retum call was not a communication, ncontrast to two other m essages that were m ore detaled and dd fall under the F DC PA ).

88. See PL's Mot. Summ. J., Ex. 5 at 2, Biggs, No. CfV-07-0053-F (transcript of messagesshowing that vocemals contaned only the name of the caller, request for a retum eall, and retumnumber); Koby, 2010 WL 1438763, at *4 (describing the message as only neludng the caller's nameand a request for a retum call).

89. See, e.g., Mark v. J.C. Christensen & Assocs., No. 09-100, 2009 WL 2407700, at *2 (D.Mnn. A ug. 4, 2009) (noting that the great weght of authority s inconsistent with the Biggs holding);Wideman v. Monterey Fn. Servs., No. 08-1331, 2009 U.S. Dst. LEXIS 38824, at *7-8 (W.D. Pa.May 7, 2009) (same); Edwards v. Nagara Credt Solutons, Ine., 586 F. Supp. 2d 1346, 1359 (N.D.G 2008) ( ) l H tt 2010 WL 3021904 t *3 ( b i th t th K b d i i


16/34


alleged that either a voicemail will not disclose that the message is from a debtcollector and run afoul of the FDCPA's disclosure requirement, or a voicemail

will have a disclosure and could mn afoul ofthe FDCPA's separate prohibitionagainst communicating information to third-parties, should a third-party comeacross the voicem ail. Thus, collectors have alleged that the appliqation of theFDCPA's provisions to voicemail messages forces them to either not usevoicemails as a form of communication or pay inevitable litigation costs.

Courts have roundly rejected this argument, finding instead that debteollectors are not entitled to use inherently risky methods of communicatingwith consumers. As the Southem District of New York observed,

just because a debt collector is permitted to continue to attempt tocollect the debt does not entitle the collector to use any m e a n s . . . . Thecourt has no authority to carve an exception out ofthe statute just so [adebt collector] may use the technology they have deemed mostefficient... , '^

Reinforcing this principle, several courts have noted that even in the absence ofa particular communication platform, debt collectors have an array of othermethods with whieh to contact putative debtors.'^ Hence, in applying theFDCPA to new technologies, the protections that federal law supplies do not

need to accommodate a particular mode of communication. Instead, theseprotections are paramount and should not be displaced because debt collectorswish to use a potentially risky method to contact consumers.

Second, the voicemail cases demonstrate that applying the FDCPA to aparticular communication platform requires a consideration of the practicaleffects that the technology may have. Several of the voicemail cases noted theconcem that exempting certain voieemails from the FDCPA would create a loophole that would allow debt colleetors to circumvent various protections

M O RT G A G E O R B (Apr, 30, 2010), http://www,m ortgageorb,eom/el07_plugins/conteniyeontent,php?eontent,5804,

91 , ' See 15 U,S,C, 1692e(b) & 1692e(l 1) (2006), An exeeption to the general rule againstdisclosing information to third parties is that a debt eoUeetor can contact a third-party to aequirelocation information about a putative debtor. Id. 1692b,

92, Leyse v, Corp, Collection Servs, No, 03-Civ-8491(DAB ), 2006 WL 270 8451, at *5(S,D,N,Y , Sept, 18, 2006); ^ee B erg v. M erchants Assoe, Collection Division, Ine,, 586 F, Supp, 2d1336, 1343 (S,D, Fla, 2008) ( [CJourts have no obligation to harmo nize different provisions of th eFDCPA so that debt eollectors may use an inherently risky method of communication); ^ee also Mark2009 WL 2407700, at *5 (dismissing the defendant's argument that they were entitled to use voieemailand noting that sueh a position had been argued by debt eolleetors in other eases and rejeeted ),


17/34

2011] DEBT COLLECTION IN THE INFORMATION AGE 1617

of the FDCPA.''' Thus, in applying the FDCPA to new technologies, it isimportant to consider the practical consequences of imposing a particular rule

of l w

in light ofthe FDCPA taken as a whole.These insights provide a foundation for approaching new technologies.When the use of a technology runs afoul of the provisions of the FDCPA, thatuse may properly be prohibited under the FDCPA. Moreover, where atechnology has the potential to undermine the FDCPA's protections, there maybe practical considerations that militate in favor of allowing the use ofparticular technologies. And both of these insights, having arisen from thecontroversy over the FDCPA's definition of communication, demonstratethat this definition is one ofthe most important sources of tension between newtechnologies and the FDCPA.

B. Deceptive Uses of Technology Under the FDCP

A second line of cases that provides guidance regarding the application ofthe FDCPA to new technologies involves the use of technology to deceiveconsumers. Although far less litigated than the use of voicemail, cases applyingthe FDCPA to potentially deceptive uses of technology have focused on twospecific technologies. First, courts have considered debt collectors' use of

caller-ID devices to disguise the identity of the person or entity placingtelephone ca lls . Second, courts have considered debt collectors ' use ofverification systems to collect information about putative debtors.'*

The handful of cases that have applied the FDCPA to caller-ID devicesdemonstrate how courts have fiexibly applied the law's general prohibition ondeceptive practices to new technologies. Unlike the voicemail cases, whichhave been eoncemed primarily with the FDCPA's disclosure requirements, thecaller-ID cases have centered on the FDCPA's prohibition against the use offalse pretenses. The FDCPA prohibits [t]he use of any false representation ordeceptive means to collect or attempt to collect any debt or to obtaininformation conceming a consumer. '^ In addition, the FDCPA specificallyprohibits debt collectors from using a false business name.'

The caller-ID cases have largely tumed on whether the debtor used thechallenged device to actively mislead the putative debtor as to the source of thecall. In Knoll v Allied Interstate Inc. a consumer alleged that a debt collectoremployed a caller-ID device that made the collector's calls appear as if they


18/34


were from Jennifer Smith. ^^ The Allied Interstate court found that the caller-ID device misled the consumer with respect to the source of the phone call,

masking the fact that a debt collector was calling.' Thus, the court concludthat the pla intif fs allegations were sufficient to survive a mo tion to dism iss.By contrast, in Glover v. Client Services Inc.the United States District

Court for the Westem District of Michigan concluded that a debt collectocaller-ID device that made the collector's phone number appear unav ailable did not violate the FDCPA .' ^ The Glover court noted that unlikethe Jennifer Sm ith ID in Allied Interstate the unavailable message was entirely accurate as it conveyed that the identity of the caller was navailab le. ' ' ' Thus , the court concluded that the caller-ID device did nconstitute false representation or deceptive m eans. ' ' '

Courts have used a similar approach in cases applying the FDCPA to thuse of verification systems that collect information about putative debtors. Rom ine v. Diversified C ollection Services Inc.the Ninth Circuit concludedthat Westem Union's telegram verification system may have been sufficient make the company a debt collector subject to the FDC PA.' ^ The challengactivity involved Westem Union's use of an Automated Voice Telegram(AVT) service to collect putative debtors' unlisted phone numbers.' ^

Through the AVT service, a consumer would receive a notification that had a telegram marked for voice delivery, and was instmcted to call a toll-frnumber to have an operator read the telegram aloud.' ' ' Unlike W estem Un iostandard telegram delivery service, the AVT service required the recipient the telegram to confirm his or her identity by providing a personal telephonum ber before the telegram could be conveyed.' ^ T he AVT process wspecifically advertised to debt collectors as a way of gathering the phonnumbers of putative debtors.' ' For instance, after the consumer in Romineprovided his confirmation information, the operator read aloud a debt collectimessage prepared by a co llector.

- Although the case only involved the preliminary question of whethW estem Union was a debt collector subject to the FDC PA, the reasoning the Romine court underscores the need for a pragmatic approach that looks athe way that technology functions as part of the debt collection process.

99 .100.101.102.103.

502 F. Supp. 2d 943 945 (D . Minn. 2007).Id . at 948. d at 949.No. l:07-CV-81 2007 WL 2902209 (W.D. M ich. Oct. 2,2007).Id . at *4.


19/34


determining whether Westem Union's activities should be subject to theprovisions ofthe FDCPA, the court looked at the rol'of the AVT system in

collecting debt-related information. The court noted Westem Union'saggressive marketing of the AVT system to debt collectors, the fact that theAVT system differed significantly from Westem Union's ordinary process oftelegram delivery, and the advertised use of the system to convey[] a sense ofurgency through the use of Westem U nion telegra m s. ' In light of theseobservations, the court found that the manner in which the AVT serviceobtained consum ers' phone numbers went beyond mere information gatheringor message delivery. ^ Accordingly, the court concluded that the AVT servicewas ofthe fype that the FDCPA was designed to deter. ^

These cases suggest that in some instances, the difficulties of applying anolder statute to new, unforeseen technologies can be resolved through a flexib leprinciple that focuses on the function and nature of the technology. There is, ofcourse, nothing in the FDCPA that directly addresses the use of caller-IDdevices or telegram veriflcation systems. But unlike the voicemail cases, thesecases did not involve any threshold issue conceming the mode of contact, suchas the conveying information requirement for provisions that apply to communications. '* Instead, the question in Allied Interstate and Glover was

whether the use of a particular technology constitutes a false representation ordeceptive means. ^ This question tums on the effect that a particular contacthas on the least sophisticated consum er. ^ As in Romine this inquiry looksat how technology is used, without being bogged down with the antecedentquestion of whether a particular technology falls under the FDCPA. ^ Becausethis determination is inherently context-specific, the flexible approach underthe deceptive technology cases appears to be equally applicable to any numberof debt collection technologies.

Along with the voicemail cases, the cases addressing deceptive uses oftechnologies by debt collectors provide guidance regarding how the currentFDCPA framework could be extended to mobile phones, e-mail, socialnetworking, and other modem communication platforms. In both the voicemailand deception cases, courts relied on the specific language of the FDCPA in

111. M a t 1147 -49 .112. / at 1149; ee also Udis v. Universal Commc'ns. Co., 56 P.3d 1177, 1180 (Colo. App.

2002) (reaching a similar conclusion w ith respect to a nearly identical telegram system).

113. Romine 155 F.3d at 1149 (finding debt collector violated the FDCPA by makingcollection calls using a caller-ID device to misleadingly display a number with the same area code asthe consumers' phone number).


20/34


determining whether a particular act ran afoul of the law. Where this languageis based on a particular characteristic of contact, as in the voicemail cases, theFDCPA has not given rise to a clear framework for approaching new technolo-gies. In contrast, where the FDCPA provides a general principle that looks tothe effect that an action has on a consumer, as in the deceptive technologycases, courts may have enough flexibility to apply the language of the FDCPAto new technologies in a sufficiently predictable manner. Thus, before analy-zing what changes should be made to the FDCPA, it is necessary to separateout those areas that may be resolved under a general principle found in thecurrent FDCPA framework from those areas that would benefit from reform.

III.APPLYING THE FDCPA FRAMEWORK TO NEW TECHNOLOGIES: IDENTIFYING

AREAS OF REFORM

Although Congress enacted the FDCPA before the advent of mobile andintemet technologies, existing cases conceming voicemail, caller-ID devices,and verification systems provide guidance regarding some of the more pressingissues emerging technologies raise. While advances in communicationtechnology have the potential to create conveniences for both collectors andconsumers, they also pose new possibilities for deception and raise seriousprivacy concems. In some cases, these challenges may be resolved adequatelythrough the current FDCPA framework. However, in other areas the FDCPAshould be reformed to ensure that debt collectors do not use new technologiesto undermine the provisions and purpose of the FDCPA. This Part addressesthe use of new technologies to communicate with consumers and gather infor-mation, identifies issues that the statutory language and existing interpretationsof the FDCPA may resolve, and suggests areas for ftiture reform.

A Communications with Putative Debtors

When debt collectors use new technologies to communicate withconsumers in a way that is closely analogous to voicemails, courts can applythe FDCPA framework to these new technologies in a similar manner.Although the mode of communication may change, the content of the messageand the purpose of inducing a consumer into discussing a putative debt remainsthe same. For example, the messages discussed in the introduction, in whichcollectors left messages for putative debtors or third-parties through Facebookor MySpace, ftinction in a similar manner as voicemails in that debt collectorsleave a message to which the recipient later responds Accordingly where


21/34

2011] DE T COLLECTION IN THE INFORM ATION AGE 1621

a debt to third parties. ^ Since many of the most egregious uses of contacts would not comply with these existing requirements, they woprohibited by the FDCPA. For example, at a recent FTC conference concdebt collection and new technologies, both plaintiff-side lawyers and inrepresentatives appeared to agree that publicly posting information that shame consumers into paying debts, like some of the examples iintroduction, would mn afoul ofthe FDCPA.' Hence, where collectocommunications made possible by new technologies in a way akivoieemails, the current FDCPA framework would suffice to ensure thtechnologies do not mislead consumers by failing to disclose that the sea debt collector or reveal sensitive information to third-parties.

In addition, new technologies may make it much easier to enforcFDCPA's disclosure and third-party requirements by creating a record communication. With telephone calls, recording a call is inconveniemany consumers, and some state laws prohibit recording an incoming As a result, many FDCPA violations go unaddressed. In contrast, ntechnologies like text messages, e-mail, and social networks generally crecord of the communication between the consumer and the collector. Thuaddition to the FDCPA framework attaching to voicemail-like comcations based on newer technology, these technologies may increaslikelihood of enforcement.

The fact that certain FDCPA provisions would attach to cotnmunicmade through mobile and intemet platforms, however, does not necesmean that these protections are adequate. In passing the FDCPA, Cosought to ensure a reasonable level of consumer privacy.'^' Althougcurrent FDCPA framework will likely be sufficient to resolve many disclosure problems new forms of communication pose based on the a

between voicemails and newer forms of communication, this analogy mhold up in the privacy context. Because new communication platforms mmuch easier to disseminate information in a public manner, consumershave different expectations regarding their use of these technologies. Hreform may be necessary to address the privacy concems that the ucharacteristics of new teehnologies ' ^

118, See 15 U,S,C, 1692e(b) & 1692e(l I) (2006),119, See Draft Transcript, Debt Colleetion 2,0, supra note 15, at 28-33,

120, Donald H, Yarbrough, consumer protection attomey specializing in FD CPA suits id at88 (noting that in many states it is generally illegal to record a telephonic eonversation); ^ee also CaryL Flitter consumer protection lawyer speeializing in FDCPA suitsid at 89 (advocating for allowing


22/34


In analyzing the privacy concems that new technologies raise. ProfesHelen N issenb aum 's model of privacy as contextual integrity

insightful.'^' ' Under Nissenbaum's theory, the mies goveming the fiow information should be tied to the norms that exist in a specific context.'^ * example, a disclosure that may be appropriate in the context of an employemployee relationship may be far different from one made in the context opersonal friendship.'^' Likewise, the venue in which a particular informatflow existsfor example a street, park, market, school, or hospitalm ay aaffect the norms related to privacy.'^*

In the context of debt collection and new technologies. Profess

Nissenbaum's theory raises the question of whether the same norms that wdeveloped to address letters and residential phone calls should also be applto social networking websites, mobile communication platforms, and e-mNotably, the FDCPA's disclosure requirements do not depend on the mediuof comm unication.'^^ The sam e disclosure that is adequate for a phone call wunder existing FDCPA standards, presumably be sufficient for othcommunication platforms as well.

Two distinctions between new and old technologies underscore the nefor ftirther consideration of the terms of the FDCPA in order to adequateaccount for privacy concems. First, unlike residential phone lines and hoaddresses, many new technologies are mobile. The mobile characteristic technology means that people will receive communications in a differcontext than the FDCPA contemplated. For example, a person may receivetelephone call placed to his mobile number at home, at the store, at work, orany other number of locations.'^^ Although the FDCPA prohibits communitions to be placed at any unusual time or place or a time or place know nwhich should be known to be inconvenient to the consumer, mobile techlogies make the application of

this provision much more difficult.'^' In order to

ensure adequate consumer privacy, clarification or reform may be appropriat

Second, partly as a result of the mobility of new technologies, mobile andintemet communication platforms have become an increasingly present partpeoples' everyday life. As the Supreme Court recently observed in City ofOntario v. Quon [r]apid changes in the dynamics of communication aninformation transmission are evident not just in the technology itself but

[njevertheless, the use of new eotnmtinieation technolog ies raises issues not necessarily contemplatedwhen the statute w as enacted ).

123 Helen NissenbaumPrivacy as Contextual Integrity79 W ASH L REV 119 (2004 )


23/34


what society accepts as proper behavior. '^ The Court went on to note that [c]ell phone and text message communications are so pervasive that some

persons may consider them to be essential means or necessary instmments forself-expression, even self-identification. '^' As a result of the pervasive andintimate nature of modem technologies, users may expect the ability to exercisecontrol over the dissemination of information, in order to maintain bordersbetween social, work, and family groups.'^^ The potential for debt collectors toexploit the intimate nature of these technologies by using new technologiesraises concems over whether existing FDCPA protections are adequate.'^''

These distinctions provide a strong justification for clarifying the sectionof the FDCPA that covers direct contacts between debt collectors andconsumers. Although the current FDCPA framework will likely ensure that thenew forms of cotnmunication disclose that the contact is from a debt collectorand prevent information fi^om being revealed to third-parties, it does notsatisfactorily address the privacy concems raised by new technologies. FDCPAprovisions that were seen as adequate to protect consumer privacy in 1977 maynot be sufficient to govem the use of technologies that involve a different set ofexpectations. Without clearer guidance, courts, consumers, and debt collectorswill be left in the unenviable position of drawing imperfect analogies between

voicemails and newer communication platforms. This will encourage firms topush the boundaries of the law, disadvantage ethical debt collectors, andjeopardize the FDCPA's overarching goal to safeguard consumers from abuseand harassment.

B. Information Gathering

As with communicating with putative debtors, courts could likely treatmany uses of new technologies to collect information in a predictable mannerunder the current FDCPA framework. Where collectors use new technologiesto gather information under false pretenses, courts can consider thesetechnologies as closely analogous to the caller-ID system in A llied InterstateKnoll and the verification system in Romine.^^ As suggested by those cases,the FDCPA's prohibition against false pretenses may be fiexible enough tocover new technologies.

130. 130 S. Ct. 2619, 2629 (2010) (discussing privacy in the context of text messa ges sent byan employee through an employer-provided mobile phone).

131. W a t 2630 .132. Avn er Levin & Patricia Snchez Abril, Tw o Notions o fl Privacy Online, 11 VA N D . J. EN T.


24/34


Hence, the standards for collecting information under the FDCPA may noneed to be modemized in order to address new technologies. In contrast to the

definition of communication and the specific disclosures required by theFDCPA, the prohibition against deceptive information gathering is written inbroad language. Indeed, the terms deceptive and misleading are inherentlydependent on the context in which an activify is carried out.'^^ In order todetermine whether a particular practice will tend to mislead or deceive aconsumer, regulators and courts must take into account the circumstancessurrounding the practice.'^^

Debt collectors should find sufficient guidance in the flexible approachapplied in the deceptive use of technology cases. Under this approach, thequestion is whether collectors use technology to deceive the consum er, and thuobtain information that the debt collector would otherwise not be able to obtainSo, while using. Google to search out publicly available information about putative debtor would likely be legal because there is no deception involvedusing a misleading alias to contact a putative debtor through a social networking website or mobile phone would likely be misleading and thus illegal.

The use of n w technologies to gather information does, however, raise se-parate issues that courts cannot easily resolve by the flexib le prohibition againsdeceptive and misleading practices. For example, users of social networkingwebsites often share certain information only with certain people who have beenallowed access, or added as a friend. Debt collectors may seek out that information and request that consumers add them as social networking fHends. '^Gary D. Nitzkin, an attomey specializing in debt collection, has claimed tha [m]y collectors and skip tracers will put their name in to be a friend to thedebtor[.] '^ Once fHends, the agents for the collector can get into their innercircle and talk to [the consumer's] other friends. '^' This, the attomey suggestsallows the agents to find assets that might otherwise remain uncovered.''*

A court, in line with a liberal interpretation of the FDCPA's provisions,might very well find this behavior to be deceptive. Given that a friend requestthat lacks a disclosure would likely deceive a significant number of consumerwith respect to the purpose of the request, a court may find that this activitymns afoul of th FDCPA. Indeed, the FTC recently concluded an investigationof Mr. Nitzkin's activities and issued a public letter detailing some of the

135. For example, the general standard of deception applied by the FTC includes aconsideration of whethe r a representation is misleading under the circum stances presented. See FT C


25/34

2011 ] DEBT COLLECTION IN THE INFORM A TION AGE 1625

possible ways that social network ing con tacts could mn afoul of the FDCPA.' *'Although the FTC declined to recommend enforcement against Mr. Nitzkin

because it did not appear that Mr. Nitzkin actually contacted a consumer debtorthrough Facebook , the letter indicates that a friend request would have to dis-close that the message is from a collector in order to adhere to the FDCPA.''*^Following this logic, a court might find that in light of the request's role as partof an ongoing debt collection process, and given the potential for harassment,the request should be considered a communication under the FDCPA.''*^

This conclusion, however, is not completely clear from the text of theFDCPA or case law. If a court found that a friend req uest did not conveysufficient content to be considered a com munica tion under the FDCP A, itcould follow Glover and find that the request constitutes lawful informationcollection.''*'* As in Glover, a court could find that a collector does not need tomake an affirmative disclosure before conveying additional content to aconsum er.''*' M oreover, it is questionable whether this type of informationcollection friend request would be subject to the disclosure requiremen t of theFDCPA, because the request does not clearly convey information regarding adebt. Indeed, a debt collector may only want to gather more information abouta putative debtor without making further contact after the initial friend request.

The potential for conflicting court decisions in this area warrants additionalconsideration conceming reform.

IV .R E C O M M E N D E D C H A N G E S A N D T H E C H A L L E N G E S O F R E F O R M

The primary challenge in applying the FDCPA to new technologies is inmodemizing the guidelines regarding direct debt collection contacts withconsumers. With new technologies, debt collection contacts with putativedeb tors may take the form of an e-mail, text message, or friend reque st, allof which create the potential for new forms of deception and pose uniqueprivacy concem s.

Draw ing on the above analysis, this Part presents three areas where reformthrough the CFPB's new mlemaking powers may be appropriate, andhighlights some of the challenges in implementing these solutions. First, theCFPB should clarify the term com mu nication to encompass all contacts withputative debtors that relate to the collection of a debt. Second, with respect tomobile and intemet technologies, the CFPB should impose additional

141. Letter fi-om Joel W inston, Associate Director, Division of Financial Praetees, Federal


26/34


requirements to ensure that consumers receive adequate protections. Finallythe CFPB should give further consideration to whether it should impose an

express written consent requirement on the use of technologies that may causeconsumers financ ial harm.

A. Textual Clarification ofthe Term Communication

A starting point for reforming the FDCPA is the term com munication.The standard of whether a debt collector's contact with a putative debtorconveys information regarding a debt has given rise to considerable confusionSome contacts made over new communication platforms, such as the Facebook

messages sent to Melanie Beacham described at the beginning of thisComment, clearly convey information, and would thus presumably be subjectto the FDCPA's disclosure requirement. However, as the voicemail casesdemonstrate, in other contexts courts have grappled with what level ofinformation is necessary to bring a contact under the ambit of commtinication. Thus, while the current FDCPA framework will besufficient in many cases to ensure that new technologies are subject to theFDCPA provisions that are specific to communications, additional clarity iswarranted to prevent confusion over contacts with minimal content.

The primary challenge is that new technologies make it more difficult toconsider a communication in isolation, apart from other contacts that collectorsmake as part of the debt collection process. The current definition of coinmunication, which requires the eonveyance of information regarding adebt, focuses on the content of th individual debt collection contact. However,an anonymous debt collection contact intmdes on a consumer's privacybecause of its status as a debt collection message, not because it conveys acertain level of content. Professor Nissenbaum's theory underscores that the

expectation of privacy flows at least in part from context.'''* Consumers likelyhave a reasonable expectation to be free from anonymous debt collectioncontacts that intmde into areas they regard as intimate, regardless of whetherthe contact conveys content regarding a debt.''*^

With new technologies, certain contacts that pose harm may beinadvertently exempted fi-om the FDCPA's current disclosure requirementwhich focuses on content. As discussed above, in contacting a consumerthrough a social networking website, a debt collector must first fi-iend theconsumer, which may not transmit any content beyond the social networking


27/34


28/34


from a debt collector. Hence, even if a debt collector used his or her real namif that name did not adequately represent that the request is fi-om a collector

should be considered deception.''^ The deception in this case would result from itting information about the collector in a way that contributes to an oveincorrect impression because ofthe consum er's assumptions about the formco m m un icatio n.' This change would ensure that consumers are protectfrom a range of deceptive practices, while providing collectors with some baguidelines that follow from the plain text of the FDCPA. Thus, with respectthe use of technology to both contact consumers and gather informatioclarifying the FDCPA to reflect the context-specific nature of privacy adeception would benefit both consumers and collectors.

B. Additional Requirements for the U se of Internet and M obile T echnologies

A second major area of potential reform concems the ability of consumto use the very same communication platform through which they receive dcollection contacts. A prominent argument for the use of new technologiesthe debt collection process is that these technologies provide a more convenimeans of communication.'^ * Just as new communication platforms permit dcollectors to more efficiently contact consumers, these platforms may almake it easier for consumers to send important messages to debt collectoNotably, although debt collectors are permitted to call consumers in order request repayment of an outstanding debt, in order to dispute the validity ofdebt and receive verification that the debt is valid, consumers must send dcollectors a written notice.'^^ New technologies could make it easier forconsumer to dispute a debt, request verification, workout a payment solution,demand that collectors cease contact.

Without additional guidance, however, new communication platform

may become a one-way street, allowing debt collectors to more efficientfurther the collection process without providing similar conveniences to conmers. For example, it is easy to envision debt collectors using technologies send text messages and e-mails, without providing a valid retum address or oout mechanism. A similar concem was a major motivating factor behind tCAN-SPAM Act, which made it a criminal offense to send unsolicitecommercial e-mail without providing the recipient an opt-out mechanism.The use of new technologies by debt collectors could create similar problems

152. See Draft Transcript Debt Collection 2.0, supr note 15, at 26 4-6 6.153 ABA S E C T I O N ANTrrRUST L A W C O N S U M E R P R O T E C T I O NL A W D E V E L O P M E N T S 14


29/34

2011] DE T CO LLECTION IN THE INFORMA TION A GE 1629

In order to address this concem, the FDCPA should be modified toimpose additional requirements on the use of modem technologies. First, the

FDCPA could require that mobile and intemet communications from collectorscontain a disclosure, a dispute process that obligates a collector to provideverification, and an opt-out mechanism. Second, in order to allow consumers totake advantage of these technologies, the dispute and opt-out mechanismswould need to allow the consumer to respond through the same technology thatthe debt collector used to send the communication. For example, a collector'smessage through a social networking website could not require that consumersopt out of future messages by sending a letter to the debt collector's physicaloffice. Instead, the consumer should be able to dispute the debt, requestverification, and opt out of future messages by responding through the socialnetworking website. In addition, these options should be presented in a clearand conspicuous manner in order to be reasonably usable,'^^

Taken together, these changes would provide a number of benefits forboth consumers and collectors. By ensuring that consumers and collectors alikecan take advantage of new technologies, these updates would deter collectorsfrom abusing new communication platforms. By giving consumers both thenotice and opportunify necessary to exercise their statutory rights through new

technologies, unethical collectors would be prevented fi'om using one-waymessages in an abusive manner. Moreover, by requiring a verification anddispute mechanism, both consumers and collectors would be able to gaingenuinely from the conveniences of mobile and intemet technologies. Andfinally, by. establishing an electronic paper trial for many debt-relatedcommunications, these requirements would deter unethical behavior.

The CFPB could model these changes off of the Federal TradeCommission's previous amendments to the Telemarketing Sales Rule (TSR),which impose requirements on telemarketing calls. Under the TSRamendments, a prerecorded call must disclose at the outset of the call that therecipient can ask to be placed on the company's do-not-call list at any timeduring the message.'^^ In addition, the amendments require that in cases wherea person answers the call, the call include an interactive voice and/or keypress-activated opt-out mechanism that adds the consumer's phone number to thecompany's do-not-call list and then immediately ends the call.'^^ If the call isanswered by an answering machine or voicemail program, the message must

Act, on the grounds that an opt-in system would provide greater protection for consumers. Jeffrey D.Sullivan & Michael B. de Leeuw, Spam After CAN SPAM: How Inconsistent Thinking Has M ade a


30/34


provide a number that allows the consumer to access an interactive voice andkeypress-activated opt-out mechanism.'^

The amendments to the TSR demonstrate that a more detailed approachmay be advantageous in order to balance the interests of consumers and debtcollectors. Applying a similar approach to debt collectors' use of newtechnologies to contact d ebtors, in addition to the current protections under theFDCPA, would be a reasonable way to ensure that both collectors andconsumers benefit from new technologies. Thus, in line with the FD CP A 's twgoals of protecting co nsum ers and ensu ring that ethical debt collectors are abto practice, the CFPB should strongly consider imposing these requirements ondebt collection communications that utilize new technologies.

C. Express Written Consent Requirement for New Technologies That MayCause Consum ers Financial Ha rm

A third area of potential reform involves the form of consent that shouldbe required to contact consumers through new technologies that may causeconsumers financial harm. The most prominent example of this issue is m obilecommunications, such as calls and texts to mobile phones. Because mobilephone plans often charge users to receive calls and text m essages, debtcollectors' use of these technologies may impose unauthorized financial coson individual con sum ers.'*'

Although the FDCPA contains a prohibition against [cjausing charges tobe made to any person for communications by concealment of the tme purposeof the communication, '*^ the Federal Communications Commission (FCC) recently proposed a mle that w ould have a potentially broader impact oncollection efforts that rely on mobile technology. Introduced in 2010, the FCCmle would clarify that the Telephone Consumer Protection Act (TCPA)

prohibits any calls m ade from an autodialer or predictive dialer to a mobiletelephoneincluding calls made by debt collectorsw ithout w ritten consentfrom the consumer.'*^ The 2010 amendments are consistent with previous FCstatements that the TC PA 's prohibition against calls made from autom atedialers extends to both voice calls and text calls to wireless numbersincluding, for exam ple, short message service (SM S) calls. '*''

Some commentators have argued that such a change will imposeunjustified burdens on ethical debt collectors. One commentator has argued, for

160. Id161. See C H A L L E N G E S O F C H A N G E , supra note 57, at 3 1 .


31/34

2011] DEBT COLLECTION IN THE INFORMATION AGE 1631

exam ple, that [t]here is virtually no way of kno wing wh ether the num berprovid ed by the debtor is a cell pho ne num ber. '*^ Av ailable software that

identifies whether a given phone number is mobile or landline, however,contradicts this argument. '** Although some industry representatives haveargued that sem bb ing mo bile pho ne call lists impo se substantial costs,other collectors have claimed that they use the technology on a regular basis.'*^

Utilizing this type of software, even if a collector erroneously called amobile telephone number, the collector could raise a bona fide error defense.The FDC PA do es not hold collectors liable wh o can show, by apreponderance of evidence that the violation was not intentional and resultedfrom a bona fide error notwithstanding the maintenance of proceduresreasonably adapted to avoid any such error. '*' Thus, eollectors who scmb cellphone numbers from lists of consumer phone numbers should not face anunduly high litigation risk.

A stronger argum ent against the F C C s m le is that a written expressconsent requirement would render many consumers practically unreachable byphone.'^^ Indeed, it is difficult to imagine a substantial number of consumersgiving written consent to be contacted by debt collectors through any medium.As David Jones, president of the Association of Independent Consumer Credit

Co unseling Age ncies has observed , mo re and mo re corisumers are mo vingaway from land lines and depending on ly on their cell pho nes . . . the collectorshave a p o in t. ' In addition, the transaction costs in receiving written consentfrom putative debtors, or altematively in manually calling consumers, mayoutweigh the potential benefit to the debt collector in contacting consumers'mobile phones.'^^ Thus, on a practical level an express written consent

165, W illiam P, Hoffman, Comment, Recapturing th e Congressional Intent Behind the FairDebt Collection Practices Act, 29 ST, LOtJIS U, PUB, L, REV, 5 49 , 565 (2010),

166, See, e.g., INTELIUS, http://www,intelius,eom (last visited Aug, 18,2010),167, See, e.g. , Cross-Industry Reply Comment on R ules and Regulations Implementing the

Telephone Consumer Protection Act of 1991 a t 4-5 (June 21 , 2010), available a t http://gallfoss,fcc,gov/eefs/doeument/view?id=7020916024,

168, S ee John W atson, Chief O perating Offieer of AR S N ational Services, Ine,, DraftTranseript, Debt Colleetion 2,0, supra note 15, at 111 (noting that beeause ofthe TCPA's prohibitionon ealling cell phone numbers, I think most ageneies, ineluding ours, have multiple senibs thathappen before a dialer gets plaeed , , , , ) ; ,ee also Brian Cutler, Senior Director of Product andProgram Management, Ontario Systems, id . ( [W]e've got a software program built into ou r systemthat we use with our dialer where we scrub for cell phone numbers, ),

169, 15U,S,C, 1692k(e)(2006),170, See Cross-Industiy Reply Comm ent, supra note 167,


32/34


requirement may result in debt collectors being precluded from being able totelephonically contact many consumers.

This makes the cell phone issue difficult to resolve. In light ofthe FDCPvoicemail cases, rendering a new technology unusable may be an acceptableand necessaryconsequence. These cases demonstrate that debt collectors arenot entitled to use technolog ies that present unacceptable harms toconsumers . ' So, if these technologies cannot be utilized withou t threateningthe protections afforded by the FDC PA , they can rightfully be excluded.

In addition to financial harms, there may b e privacy con cem s that warrana heightened consent requirement. As discussed above, c ollectors' use of

mobile telephones raises an enormous risk of mnning afoul of the FDC PA'sprohibition on unusual time or plac e contacts.'^' ' M obile phones move arouwith their owner, and the area code of a mobile telephone number may notrefiect the ow ner's cu rrent location, or time zone. In a 2009 report on debtcollection, the FTC concluded that given this characteristic, debt collectorshould only be able to call mobile telephones if they have prior express consefrom a co nsu m er. ' Much like the FCC's proposed mle, the FTC'srecommended changes would require that consumers be adequately informedthat they may receive collection calls on their mobile phones and that the

consum ers have taken some affirmative step to indicate their agreement toreceive such calls. '^*

While it is iiriportant to ensure the privacy of consumers, a practicalwholesale bar on the use of new technologies may have unwanted conse-quences for consumers and collectors alike. If a substantial proportion ofconsumers begin to rely solely on cell phones as a form of comm unication, thewritten consent requirement may leave collectors with few ways to contactputative debtors. Moreover, although an express written consent requiremen t

appears to be consistent with both the purpose ofth e FDC PA and case law, it isnot necessarily the best response to collectors' use of mobile technologies. Theopportunity for consumers to dispute a debt over the phone, and to opt out offurther communications, could provide benefits that militate against a writtenconsent requirement.

At this stage, whether the FCC's proposed mle will ultimately create theburden that collectors have predicted is unclear.'^^ Against this uncertainty, tCFPB should continue monitoring the use of mobile technologies by debtcollection companies to determine whether further action is necessary. In

173 Seesupra notes 92-93 and aeeompanying text


33/34

2011] DE T CO LLECTION IN THE INFORM TION GE 1633

particular, it should gather information regarding what percentage of consumerdebt collection complaints received by the FTC and other consumer protection

agencies involve mobile technology. The CFPB can employ its mlemakingpowers to solicit comments from industry representatives and consumeradvocacy groups to further study the issue. While there may not be sufficientevidence to impose a blanket ban on mobile technologies, the CFPB shouldclosely monitor this area as a potential target for nature reform.

CONCLUSION

There are compelling reasons to modemize the FDCPA so that it refiects

new and emerging technologies. With the debt collection industry rapidlyexpanding and collectors pushing the boundaries of lawful behavior, bothconsumers and ethical debt collectors may be harmed in the absence ofsensible reform.

To address the potential for deeeption and novel privacy concems thatnew technologies present, the newly created CFPB should consider revising theFDCPA in three ways. First, the CFPB should clarify the definition of communication in order to provide necessary guidance regarding the need fordisclosures. Second, the CFPB should require that debt collectors'communications that rely on new technologies clearly and conspicuouslypresent consumers with a workable disclosure, dispute process, and opt-outmechanism. Third, the CFPB should closely monitor the use of mobiletechnologies by debt collectors, in order to assess whether an express writtenconsent requirement is warranted. These changes would strike a better balancebetween the need to ensure adequate consumer protection and the interest thatthe debt collection industry has in utilizing new technologies.


34/34

Reproduced with permission of the copyright owner. Further unauthorized reproduction is prohibited without

permission or in accordance with the U.S. Copyright Act of 1976 Copyright of California Law Review is the

property of University of California Press and its content may not be copied or emailed to multiple sites or

posted to a listserv without the copyright holder's express written permission. However, users may print,

download, or email articles for individual use.

Debt Collection Information Age

Documents

Transcript of Debt Collection Information Age