TR Daily Court Rules TCPA Debt-Call Exemption Violates Constitution
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Wednesday, April 24, 2019

Court Rules TCPA Debt-Call Exemption Violates Constitution

The U.S. Court of Appeals for the Fourth Circuit (Richmond) has ruled that a 2015 amendment to the Telephone Consumer Protection Act violates the free speech clause of the First Amendment of the U.S. Constitution by exempting calls related to debts owed to or guaranteed by the federal government from the TCPA’s prohibition on robocalls made without consent of the called party — in part because the huge-number of loans that are guaranteed by the federal government means that the exemption does not pass a requirement that content-based restrictions on speech be “narrowly tailored.”

However, the appeals court said that the robocall prohibition could stand by severing the content-based exemption for government debt-collection calls.

In an opinion released today in “American Association of Political Consultants, Inc., et al. v. FCC” (case 18-1588), Circuit Judge Robert B. King, writing for a unanimous three-judge panel, said, “In awarding summary judgment to the Government in March 2018, the [district court’s] Opinion rejected the free speech challenge interposed by the Plaintiffs. The district court applied strict scrutiny review to the debt-collection exemption and ruled that it does not violate the Free Speech Clause. As explained below, we agree that strict scrutiny review applies in this case but conclude that the debt-collection exemption does not satisfy such a review. As a result, we agree with the Plaintiffs that the debt-collection exemption contravenes the Free Speech Clause. In agreement with the Government, however, we are satisfied to sever the flawed exemption from the automated call ban. We therefore vacate the judgment and remand.”

Judge King explained, “For more than twenty years [after the 1991 enactment of the TCPA], the emergency and consent exemptions were the only statutory exemptions to the automated call ban. In 2015, however, Congress enacted the third statutory exemption — the debt-collection exemption — and therein excepted from the ban all calls to cell phones ‘made solely to collect a debt owed to or guaranteed by the United States.’ … In addition to the statutory exemptions, automated calls made by the federal government itself are not barred by the automated call ban. …

“In May 2016, the Plaintiffs filed this lawsuit in the Eastern District of North Carolina, alleging, inter alia, 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 also 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. The Plaintiffs therefore allege that the debt-collection exemption to the ban contravenes the Free Speech Clause,” he continued.

The government had argued that the distinction is not content-based and is instead based on the relationship between the calling-party and the called-party.

The appeals court agreed with the district court in rejecting that argument.

“The content-based nature of the debt-collection exemption is demonstrated by an illustrative example. As explained by the district court, a private debt collector could make two nearly identical automated calls to the same cell phone using prohibited technology, with the sole distinction being that the first call relates to a loan guaranteed by the federal government, while the second call concerns a commercial loan with no government guarantee. Although the first automated call would satisfy the debt-collection exemption and not be subject to the automated call ban, the second call would not satisfy the exemption and would be illegal. The legality of those phone calls, due solely to the debt-collection exemption, thus depends on their subject matter (i.e., their content),” Judge King wrote.

Because the exemption applies to third-party debt collectors with whom the called-party has no prior relationship, the exemption is not relationship-based, the appeals court said.

The court then subjected the content-based restriction on robocalls to strict scrutiny review, which requires that the restriction advance a compelling government interest in a narrowly tailored manner.

The government argued that the ban on unauthorized robocalls “protects and shelters the privacy interests of American consumers. … It also argues that, as part of the automated call ban, the debt-collection exemption does not undermine the privacy protection efforts embodied in the ban. According to the Government, that exemption applies only to a ‘narrow category of calls,’” and therefore does not “‘appreciab[ly] damage’ the privacy interests underlying the automated call ban,” Judge King wrote.

“We are unpersuaded by the Government’s compelling interest argument. Again, the debt-collection exemption does not further the purpose of the automated call ban in a narrowly tailored fashion. … In fact, the exemption applies in a manner that runs counter to the privacy interests that Congress sought to safeguard.

“Significantly, the potential reach of the debt-collection exemption belies the Government’s asserted ‘narrow’ framing of it. According to the FCC, the federal government, by the end of fiscal year 2016, had either guaranteed or was owed nearly eighty-percent of all outstanding student loan debt. … An FCC report also revealed that more than 41 million borrowers owed over one trillion dollars in federal student loans,” Judge King continued. In addition, he noted, other departments, including Agriculture, Housing and Urban Development, and Health and Human Services also make or guarantee loans.

“Because of the expansive reach of the debt-collection exemption, it is woefully underinclusive and does not serve the compelling governmental interest of protecting privacy in a narrow fashion. The exemption thus cannot be said to advance the purpose of privacy protection, in that it actually authorizes a broad swath of intrusive calls,” Judge King wrote.

“[T]he FCC itself has acknowledged that debt-collection calls are among the most intrusive, disruptive, and complained of phone calls made to American consumers,” he added.

With regard to the severance issues, Judge King wrote, “For several reasons, we agree with the Government on the severance issue. First and foremost, the explicit directives of the Supreme Court and Congress strongly support a severance of the debt-collection exemption from the automated call ban. Furthermore, the ban can operate effectively in the absence of the debt-collection exemption, which is clearly an outlier among the statutory exemptions.” He noted that the TCPA operated for 20 years without the debt-collection exemption.

Judge King was joined in the opinion by Circuit Judges Barbara Milano Keenan and A. Marvin Quattlebaum Jr. —Lynn Stanton, [email protected]

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