Banking and Finance Law Daily Debt-collection exemption to automated call ban found unconstitutional
Thursday, April 25, 2019

Debt-collection exemption to automated call ban found unconstitutional

By J. Preston Carter, J.D., LL.M.

Although the Fourth Circuit held that the debt-collection exemption to the Telephone Consumer Protection Act’s automated call ban violates the Free Speech Clause of the First Amendment, it left the remainder of the ban in place.

The debt-collection exemption to the Telephone Consumer Protection Act’s automated call ban violates the Free Speech Clause of the First Amendment, the U.S. Court of Appeals for the Fourth Circuit held. However, it found that the exemption can be severed from the ban so that the remainder of the ban remains constitutional (American Association of Political Consultants v. FCC, April 24, 2019, King, R.).

Automated call ban. The court stated that, as pertinent to this litigation, the TCPA’s automated call ban prohibits calls to cell phones by use of an automated dialing system or an artificial or prerecorded voice, subject to three statutory exemptions (47 USC § 227(b)(1)(A)). One exemption concerns emergency calls, another pertains to calls made with the prior express consent of the called party, and the third—the debt-collection exemption—authorizes automated calls that relate to the collection of debts owed to or guaranteed by the federal government.

Complaint. The American Association of Political Consultants and two other plaintiffs filed a lawsuit alleging that the debt-collection exemption to the automated call ban contravenes their free speech rights because it is a content-based restriction on speech that fails to satisfy strict scrutiny review. According to the complaint, the debt-collection exemption creates a regime that permits, and thereby unconstitutionally favors, a select group of otherwise prohibited automated calls to cell phones. The complaint alleges that whether an automated phone call satisfies the debt-collection exemption, and thus escapes the prohibitions of the automated call ban, depends on the call’s content.

Lower court decision. Although the lower court held that the debt-collection exemption to the automated call ban constitutes a content-based restriction on speech, applying strict scrutiny review to the debt-collection exemption, it ruled that the exemption does not violate the Free Speech Clause. The lower court granted summary judgment to the government.

Plaintiffs’ appeal. In their appeal, the plaintiffs contend that the debt-collection challenge exemption does not satisfy strict scrutiny review because it does not further any compelling governmental interest, and the entire ban, not just the debt-collection exemption, must be invalidated. Severance, say the plaintiffs, is not a permissible remedy.

Appellate court decision. The appellate court said it needed to address three issues: (1) Is the debt-collection exemption a content-based speech restriction subject to strict scrutiny review, or does it constitute a content-neutral speech restriction subject to intermediate scrutiny analysis; (2) Does the debt-collection exemption to the automated call ban survive the applicable level of scrutiny; and (3) If the debt-collection exemption impermissibly infringes on free speech rights, should the automated call ban be struck in its entirety, or can the flawed exemption be severed?

Content-based speech restriction. First, the court determined that the debt-collection exemption to the automated call ban is facially content-based. Therefore, following the Supreme Court’s Reed decision (Reed v. Town of Gilbert, 135 S. Ct. 2218 (2015)), the Fourth Circuit determined that speech restriction is subject to strict scrutiny. The government argued that the applicability of the exemption turns on the debtor’s relationship with the government. However, the court pointed out that the text of the exemption makes no reference to the relationship between the caller and recipient; instead, "the exemption regulates on the basis of the content of the phone call...The debt-collection exemption applies to a phone call made to the debtor because the call is about the debt."

Survival of scrutiny. Second, the court found the debt-collection exemption fails to satisfy strict scrutiny, constitutes an unconstitutional content-based restriction on speech, and therefore violates the Free Speech Clause. Again, following the Reed decision the court examined the speech restriction for "underinclusiveness," which is a restriction that covers too little speech, thereby leaving "appreciable damage to the government’s interest unprohibited."

The court said the exemption "is fatally underinclusive for two related reasons." First, by authorizing many of the intrusive calls that the automated call ban was enacted to prohibit, the debt-collection exemption subverts the privacy protections underlying the ban. Second, the impact of the exemption deviates from the purpose of the automated call ban and, as such, it is an outlier among the other statutory exemptions.

In seeking to justify the debt-collection exemption, the government maintained that the automated call ban (including the exemption) furthers a compelling governmental interest by protecting personal and residential privacy. The court, however, said the exemption applies in a manner that runs counter to privacy interests. It noted an FCC report revealing that more than 41 million borrowers owed over one trillion dollars in federal student loans, and this debt "is but one category of debt that is guaranteed by or owed to the federal government." Thus, the court said, "millions of debtors owe debts about which third parties can make otherwise prohibited calls under the debt-collection exemption."

Severance. Finally, the court agreed with the government that "controlling authorities require a severance of the exemption from the automated call ban. The court found that (1) the explicit directives of the Supreme Court and Congress strongly support a severance of the debt-collection exemption from the automated call ban, and (2) the ban can operate effectively in the absence of the debt-collection exemption, which is clearly an outlier among the statutory exemptions. From 1991, when the TCPA was enacted, until 2015, when the debt-collection exemption took effect, the automated call ban was "fully operative." As a result, the court concluded, "the Plaintiffs simply cannot show that excising the debt-collection exemption will hamper the function of the ban."

This is case No. 18-1588.

Attorneys: Kellie Mitchell Bubeck (Copilevitz & Canter, LLC) for American Association of Political Consultants, Inc., Democratic Party of Oregon, Inc., Public Policy Polling, LLC and Washington State Democratic Central Committee. Robert J. Higdon, Jr., Office of the U.S. Attorney, for the FCC.

Companies: American Association of Political Consultants, Inc.; Democratic Party of Oregon, Inc.; Public Policy Polling, LLC; Washington State Democratic Central Committee

MainStory: TopStory CyberPrivacyFeed DebtCollection EnforcementActions MarylandNews NorthCarolinaNews SouthCarolinaNews Privacy VirginiaNews WestVirginiaNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Banking and Finance Law Daily

Banking and Finance Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on banking and finance legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More