June 12, 2014

Robo-Collectors Warned, Prepaid Customers Shielded: Two Federal Appeals Courts Address Personal Privacy Rights of Voice Service Customers

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By Doug Brent

Telecommunications competition, local number portability (the ability to switch carriers and retain your phone number) and the exploding market for prepaid wireless services have moved us far from the days when a phone number could reliably be connected to a certain place or person. That reality has important legal consequences for debt collectors and for state law enforcement officials, as illustrated in new telecom privacy decisions from two U.S. Courts of Appeal. Though the cases are dissimilar, both involve customer privacy, mobile telephones, and federal telecommunications privacy statutes.

“Called Party” means who you called, not necessarily whom you intended to call.

More consumers may soon be hearing the voices of live agents on the other end of the phone when receiving collections calls from creditors, thanks to Breslow v. Wells Fargo Bank (11th Cir., June 4, 2014). This Florida lawsuit involved robo-collection calls intended for a former customer indebted to the bank. But the phone number had apparently been reassigned, so the calls went to the cellphone of “R.B.,” the minor child of Breslow. Breslow sued the bank under Section 227 of the Telephone Consumer Protection Act of 1991 (“TCPA”), which prohibits the use of an automatic dialing system to call a cellular phone without the prior express consent of “the called party.” The statute includes a private right of action and a minimum of $500 for each violation.  A lower court granted partial summary judgment and the Court affirmed.

The bank defended its calls by claiming “called party” necessarily means the intended recipient of the call. (A bank affidavit linked the phone number to the debtor.) The appeals court panel disagreed after considering the possible meanings of the term, informed by the legislative history of the TCPA. The Court said it would be incongruous for Congress to create a strict liability penalty (the $500 minimum per violation) and also require plaintiffs to prove that a caller acted with some level of fault. Instead, the Court held, “Congress appears to have placed the burden on callers to ensure they do not violate [the TCPA].” This was consistent with Congressional goals to balance “[i]ndividual’s privacy rights, public safety interests,” against “commercial freedoms of speech and trade.”

As for “express consent,” the Court aptly noted it can be a moving target. After all, “a bank customer who owes a debt may decide to get rid of the cell phone after receiving the first debt-collection call in an effort to avoid paying the debt.” (On June 9 the panel vacated its original opinion and provided a short substitute, noting that another panel of the court, faced with the same question, concluded earlier this year that “called party” means the subscriber to the cell phone service. That decision is Osorio v. State Farm Bank, FSB. Since Breslow was the subscriber for her child’s phone, the result is unchanged.)

Puerto Rico cannot force wireless carriers to mass-identify prepaid subscribers.

In Telecommunications Regulatory Board of Puerto Rico v. CTIA (1st Cir. May 9), the issue centered on whether a state can proscribe the anonymous use of a wireless phone. Prepaid cellular services have been a growth engine for the wireless industry, drawing participation from industry giants like AT&T, as well as smaller providers and wireless resellers like Tracfone.  Since they are pay as you go services, they can be acquired without a credit check, and on a cash basis. Thus, prepaid telephone numbers don’t necessarily have a connection to a named subscriber. Some law enforcement officials have alleged this allows criminals to communicate anonymously, making them difficult to track and locate. (Fans of HBO’s “The Wire”  are acquainted with this issue.)

To counter this perceived problem, Puerto Rico enacted a law (the “Registry Act”) requiring every business entity that sells a prepaid mobile telephone unit to require photo identification at the time of purchase and for all owners to register an address and alternative phone number. Under the Registry Act the Telecommunications Regulatory Board of Puerto Rico would create and maintain the registry of prepaid cell phone numbers.

CTIA, a wireless industry group, challenged the Act as a direct conflict with the Stored Communications Act (“SCA”), a federal law that restricts the ability of wireless providers to release customer information to governmental entities without a subpoena. A lower court found the Registry Act preempted by the SCA, agreeing with the industry that the language of the SCA prohibits the disclosure of cellphone customer information required by the Registry Act.

The Regulatory Board tried to avoid preemption by arguing the Registry Act constitutes a valid exercise of Puerto Rico’s police powers that do not conflict with the SCA, claiming the SCA protects only customer information related to specific communications and not information required by the Registry Act itself, such as a customer’s name and address.

The 11th Circuit wasn’t persuaded. Noting the text of the SCA is precise and that it clearly does not limit its protections to transactional records such as call logs, the court said “Telephone connection records are but one of six specifically enumerated types of protected information; a wireless service customer’s name, address, length of service, telephone or instrument number, and means of payment are also explicitly protected by the statute and cannot be released to a governmental entity without a subpoena.”

The Court was similarly unimpressed by an argument that the registration required by the Act was comparable to publishing a telephone book, reasoning that there is a distinct difference in placing personal information in a phone book and being compelled to release personal information to government entities as required by the Registry Act. The Appeals Court said it was not unsympathetic to the Puerto Rican government’s desire to combat the exploitation of prepaid phones for criminal purposes, but said that “worthy objective” cannot run afoul of federal law. The district court’s order enjoining the enforcement of the Registry Act was affirmed.