The banking industry, which wanted curbs on costly lawsuits over unwanted robo-calls to consumers, was dealt a rebuke Thursday by the Federal Communications Commission.
In a party-line vote, the FCC approved new robo-calling rules that mostly rejected the entreaties of banks and other companies. For bankers, the 3-2 vote represents a reversal of fortune. Early this year, industry representatives expressed confidence that the FCC would issue a sympathetic ruling. On Thursday they voiced their displeasure.
"We are disappointed with today's FCC vote and concerned about the inevitable chilling of beneficial consumer communications," Richard Hunt, president of the Consumer Bankers Association, said in a news release. "Class-action attorneys appear to be today's winners at the expense of consumers and well-meaning American businesses."
Under the Telephone Consumer Protection Act, which was enacted in 1991, banks and other business are generally barred from making robo-calls to a cellphone without the consumer's prior consent.
Violations are subject to strict liability - $500 for each unsolicited call, or $1,500 if the company intentionally makes a call after the cellphone user denies permission. Callers are liable even if they have the permission of the person they are trying to reach but the phone number has been reassigned to another individual.
Banks wanted the FCC to change that standard, so that they would not be on the hook when they inadvertently reach the wrong person, especially in light of the fact that there is no comprehensive database that can be checked to determine whether a phone number has been reassigned.
Consumer advocacy groups, which strongly opposed the changes that banks were seeking, declared victory.
"The industry petitions would have exposed consumers to a tsunami of unwanted robo-calls and texts to their cellphones," Margot Saunders, an attorney with the National Consumer Law Center, said in a news release.
The rules passed by the FCC carve out an exemption for the first wrong-number phone call but not for any subsequent calls to that number. An FCC staffer said that the new rules will provide an incentive for companies to take proactive steps, such as confirming the phone number by email, to ensure they are robo-calling the right person.
"The new user of a reassigned phone number shouldn't have to put up with being abused by callers for the old user of the phone number," said FCC Chairman Tom Wheeler, a Democrat.
FCC Commissioner Ajit Pai, a Republican, complained that companies will be liable even if they have no reason to know they are calling a wrong number. "This will certainly help trial lawyers update their business model for the digital age," he said.
Democratic Commissioner Mignon Clyburn voted for the new rules, but also acknowledged that the provisions on recycled phone numbers will cause difficulties for banks and other businesses.
"I am sympathetic to the challenges these companies face, since the absence of a comprehensive database of reassigned numbers may be an issue," she said. "The commission is striking a difficult but necessary balance."
The new FCC rules also provide banks with a narrow exemption from liability for certain auto-dialed calls involving fraud alerts. All of the details of that exemption were not available Thursday, but the American Bankers Association welcomed the carve-out.
"Exempting data breach and fraud alerts from outdated regulatory restrictions on calls and texts to mobile devices is critical to effective fraud prevention," ABA President Frank Keating said in an emailed statement.
The rules do not give banks a break with respect to debt-collection calls, which have been the subject of much of the litigation against banks.
On a less contentious issue, the FCC's new rules make clear that cellphone companies are allowed to offer technology to their customers that will allow them to block unwanted robo-calls.
During Thursday's FCC meeting, the partisan divide over robo-calling was stark. Democrats described the phone calls as a growing nuisance, while Republicans focused on the nuisance that frivolous lawsuits pose to legitimate businesses.
"I detest robo-calls," Democratic Commissioner Jessica Rosenworcel said. "We receive thousands of complaints a month about robo-calls, and our friends across town at the Federal Trade Commission receive tens of thousands more."
Meanwhile, Republican Commissioner Michael O'Rielly complained that he was misled into believing that the FCC planned to offer relief from litigation.
"Along the way, some of us were led to believe that we were working together to find a common resolution," he said. "Instead we were being deceived in order to produce one of the most slanted documents I've ever seen. I will not be so naïve to trust again certain people in leadership positions at the commission."
Banks have paid more than $200 million to settle robo-calling suits in recent years.
In what's thought to be the largest robo-calling settlement, Capital One Financial agreed last year to pay $73 million to settle a case, with consumers receiving an estimated $20-$40 each and up to $22.5 million set aside for attorney fees and costs.
Lisa Simonetti, a lawyer at Vedder Price who has represented banks in robo-calling suits, predicted: "Litigation will continue in its current volume, or possibly even intensify."
