Supreme Court ruling eliminates autodialer use for FHA, VA collections

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The U.S. Supreme Court's ruling in a Telephone Consumer Protection Act case will have an immediate impact on servicers of federally guaranteed mortgages who have used robocalls to reach borrowers.

The ruling ended an exemption that permitted autodialing to consumer cellphones for collections of government-related debt, like mortgages.

"While the Supreme Court's ruling did not add any new requirements for mortgage lenders, it reinforces that TCPA compliance remains very much in force," said Mike Eshelman, head of consumer finance at the fintech firm Jornaya.

"Mortgage lenders need to ensure that they have a solution to protect themselves or they will be exposed to potential lawsuits and settlements which have recently averaged as much as $6.6 million," Eshelman added.

Damages for TCPA violations start at $500 per call or text. This amount can be tripled for willful violations of the act.

Servicers may still call consumers manually, assuming they meet all the criteria around spam phone calls, which are prohibited by the TCPA, as well as the Can-Spam Act, said Marx Sterbcow, a mortgage industry attorney.

The exemption at the heart of the Supreme Court decision was created in a 2015 amendment to the TCPA, which had bipartisan support. But that amendment only covered Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture Rural Housing Service mortgages.

The decision means that servicers once again need to have an unrevoked consent to contact consumers regarding collections for those loans and other forms of federal debt like student loans.

This case is separate from past actions from the Federal Communications Commission, which has refused to grant a similar exemption to cover Fannie Mae and Freddie Mac loans.

In 2018, 17 groups, including the American Bankers Association, Mortgage Bankers Association and Credit Union National Association, petitioned the FCC to again amend its interpretation of the TCPA to make robocalling lawsuits harder to win for consumers. This followed a March 2018 appellate court ruling that invalidated the prior FCC interpretation.

The case before the Supreme Court, Barr v. American Association of Political Consultants, came at the issue from a different point of view. The lobbying group contended that Congress was treating dissimilar aspects of speech in an unequal fashion.

In the majority opinion, Justice Brett Kavanaugh agreed with that point, stating "because the law favors speech made for collecting government debt over political and other speech, the law is a content-based restriction on speech."

But seven of the justices said that the TCPA was not unconstitutional (as the AAPC wanted and the other two conservative justices supported). The majority argued that the 2015 amendment could be severed from the other provisions of the law.

"As a result, plaintiffs still may not make political robocalls to cell phones, but their speech is now treated equally with debt-collection speech," Justice Kavanaugh wrote.

The decision was a big win for consumers, said Margot Saunders, an attorney with the National Consumer Law Center.

"We were very concerned that the whole TCPA was possibly in danger. This decision does protect consumers from unwanted, unconsented to, robocalls related to government-backed debt," she said.

What the court ruling does not end are discussions around what constitutes consent as written in the mortgage contract and whether that can be revoked unilaterally, Saunders said.

Also, the case did not settle the matter of what an automated telephone dialing system is for the purposes of TCPA compliance.

The ABA and other groups are petitioning the FCC to allow robocalls regarding information about forbearances and other coronavirus-related initiatives without advance consent from consumers.

So far the FCC has not responded, said Saunders, whose organization supports the measure.

Without the exemption, staffing becomes an issue for servicers looking to stay in contact with consumers who might be delinquent or had forbearances, Sterbcow said.

"Are you going to have adequate staff to make individual calls? And that is going to add some back-end costs for mortgage servicers and debt collectors," said Sterbcow.

If anything, the ruling is an opportunity for mortgage servicers to improve the way they interact with their customers, said Jane Mason, CEO of the servicing technology provider Clarifire.

"Some of our clients are using technology to perpetuate self-service accessibility for customers," Mason said. "What they're doing, is they're offering a choice about how they want to be communicated with."

The consumer can set other parameters around contact, such as what hours they can be called or otherwise contacted.

"So the servicers will be OK as long as they embrace, from their call center collections perspective, new ways of thinking about the interactions with their customers," Mason said.

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