Third Circuit Serves Up Double Fault in FDCPA, TCPA Decision

A recent decision from the Third Circuit Court of Appeals examines both the provision of consent under the federal Telephone Consumer Protection Act (TCPA) and the bona fide error defense for debt collectors under the federal Fair Debt Collection Practices Act (FDCPA).

The decision has dire implications for debt collectors, creditors and any commercial enterprise using telephone technology and QR codes in communicating with customers.

A copy of the decision in Daubert v. NRA Group, LLC is available at: Link to Opinion.

First up is the TCPA. The trial court ruled that the collection agency violated the TCPA when it used an automated dialing system to call the consumer to collect a medical debt without prior consent because the defendant’s deposition witness previously testified that “the dialer does the dialing.”

In an attempt to fix this error, the collector later submitted an affidavit stating that the telephone dialing system used “human intervention” to make the calls. The trial court labeled this a “sham affidavit” and would not consider it. Worse, even though the consumer appears to have provided his cell phone number to the hospital where he incurred the medical debt, the Third Circuit ruled “more is required” than the simple provision of the cell phone number to an intermediary hospital that was not a creditor.

Distinguishing decisions from the Sixth and Eleventh Circuits (Baisden and Mais, respectively), the Third Circuit pointed out that in those cases the hospital intake forms gave permission to release the consumer’s information for payment purposes. Here, there was no evidence that the consumer released his information to be used for payment purposes. The court affirmed an award to the consumer of $34,000 for 69 telephone calls.

Now for the FDCPA ruling — a debt collector cannot rely on a trial court decision to escape FDCPA liability. That’s tough because as new theories develop, companies will often adjust their practices to align with applicable decisions.

In this case, the debt collector had made operational changes to use Quick Response codes in its mail communications to consumers. It did so relying on two trial court decisions that found that the use of QR codes visible on the face of envelopes did not violate the FDCPA. When the debt collector was later sued for using such QR codes, the trial court here found that it did violate the FDCPA, but the debt collector was exempt from liability under the FDCPA’s bona fide error exception because it relied on the earlier trial court decisions.

The Third Circuit reversed, finding that a bona fide error cannot be premised on a mistaken legal interpretation of the FDCPA, even when it is premised on trial court decisions from within the same Circuit.

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Donald Maurice provides counsel to the financial services industry, successfully litigating matters in the state and federal courts in individual and class actions. He has successfully argued before the Third, Fourth and Eighth Circuit U.S. Courts of Appeals, and has represented the financial services industry before several courts including as counsel for amicus curiae before the United States Supreme Court. He counsels clients in regulatory actions before the CFPB, and other federal and state regulators and in the development and testing of debt collection compliance systems. Don is peer-rated AV by Martindale-Hubbell, the worldwide guide to lawyers. In addition to being a frequent speaker and author on consumer financial services law, he serves as legal counsel to DBA International and as chair of the ABA's Bankruptcy and Debt Collection Subcommittee. He serves on the governing Board of Regents of the American College of Consumer Financial Services Lawyers and on the Governing Committee of the Conference on Consumer Finance Law .