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Mass. SJC Holds Mass. Debt Collection Regs Apply to Creditors that Auto Dial or Don’t Leave Messages

The Massachusetts Supreme Judicial Court (SJC) recently held that Massachusetts debt collection regulations, which limit how often a creditor may attempt to contact a debtor via telephone in order to collect a debt, apply to creditors that use automatic dialing devices or voluntarily decide not to leave voicemail messages.

A copy of the decision in Armata v. Target Corporation is available at:  Link to Opinion.

The plaintiff initiated a matter in Superior Court, alleging the defendant violated 940 Code Mass. Regs. § 7.04(1)(f), which provides that “[it] shall constitute an unfair or deceptive act or practice for a creditor to contact a debtor…[by] [i]nitiating a communication with any debtor via telephone, either in person or via text messaging or recorded audio message, in excess of two such communications in each seven-day period to either the debtor’s residence, cellular telephone, or other telephone number provided by the debtor as his or her personal telephone number…”

The material facts were not in dispute. The plaintiff obtained a store-branded credit card, which she used to incur a debt at the defendant’s store. The defendant subsequently telephoned the plaintiff numerous times in order to collect the debt, including instances where the defendant telephoned the plaintiff more than twice in a seven-day period.

No person from the defendant physically placed the calls to the plaintiff. Instead, the defendant used a “predictive dialer,” which is an automated telephone dialing system (ATDS). Although the defendant was able to leave the plaintiff voicemail messages, it did not do so based on company policy not to leave voicemail messages.

The defendant did not deny that it telephoned the plaintiff more than twice in a seven-day period. Instead, the defendant maintained the regulation did not apply to all calls, but rather, only calls that are “initiat[ed]…either in person or via text messaging or recorded audio message.”

According to the defendant, it did not “initiate” any communication within the meaning of the regulation because it telephoned the plaintiff with an ATDS, which only plays recorded messages after the call is answered and no live representative is available. The defendant also argued that the majority of the calls went unanswered, and thus did not constitute “communications” within the meaning of the regulation because they did not convey any information since they did not leave voicemail messages.

In the alternative, the defendant argued that it was exempt from the regulation under the Attorney General’s (AG) guidance, which provides that “unsuccessful attempts by a creditor to reach a debtor via telephone may not constitute initiation of communication if the creditor is truly unable to reach debtor or leave a message for the debtor.” According to the defendant, it was exempt since, although it was able to reach the plaintiff, it could not, as a practical matter, leave her voicemail messages without violating state and federal law.

The Superior Court granted the defendant’s motion for summary judgment, reasoning that the defendant’s unsuccessful attempts to speak with the plaintiff via telephone did not constitute “communications” as defined by the regulations, and that there was no indication the plaintiff heard a prerecorded message from the defendant more than twice in a given week. The plaintiff appealed and the SJC transferred the case on its own motion.

On appeal, the SJC held that the defendant’s interpretation of the regulation was inconsistent with its plain meaning and AG’s guidance, and contrary to its purpose of preventing creditors from harassing, oppressing, or abusing debtors.

As the SJC noted, the defendant’s “reading would create a loophole so large as to swallow the rule, such that nearly every creditor would be able to evade the limits imposed by the regulation simply by changing its dialing technology.”  Thus, the SJC held that it makes no difference what technology a creditor uses to dial the debtor’s telephone or at what point a prerecorded message begins playing.

Next, the SJC held that the defendant’s argument that unanswered calls were not “communications” under the regulation was unavailing because the regulation does not limit “communication[s],” but the initiation of communications. According to the SJC, the mere fact that the defendant did not successfully convey information to the plaintiff was insignificant because the defendant initiated the process of conveying information to the plaintiff via telephone.

Finally, the SJC held the defendant’s exemption argument was unpersuasive because Massachusetts regulations are not as restrictive as the defendant contended and because the defendant did not fall within the purview of the FDCPA.

Although Massachusetts regulations prohibit a creditor from implying “the fact of a debt” to anyone who is not the debtor, the SJC disagreed with the defendant’s claim that it could not leave a voicemail because it could not know who would listen to the voicemail.

As the SJC noted, the defendant was not prevented under Massachusetts regulations from leaving the plaintiff a message, so long as the defendant refrained from implying that the telephone call concerned a debt. Although, unlike Massachusetts regulations, the FDCPA requires debt collectors to disclose that any “communication is from a debt collector,” the defendant was not prevented from leaving a voicemail under the FDCPA because it was attempting to collect a debt on its own behalf and, therefore, did not fall within the statute’s definition of a debt collector.

Accordingly, the SJC held that, at times the defendant was able to reach the plaintiff or leave a voicemail message, it initiated telephone communications within the meaning of the regulation. Since the defendant initiated such telephone communications more than twice in a seven-day period, the SJC held that the plaintiff was entitled to summary judgment on the issue of liability and remanded the case for a determination on the plaintiff’s request for damages, costs, and injunctive relief.

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Brady Hermann is based in Maurice Wutscher’s Boston office and supports the firm’s litigation matters in its New York office, practicing in the firm’s Commercial Litigation and Consumer Credit Litigation groups. Brady has substantial experience as a litigation attorney. He has represented individual and corporate clients in complex litigation matters, focusing on securities litigation and regulation, business and commercial litigation, multidistrict litigation and class actions and more. In addition, he has represented many of the nation’s largest securities broker-dealers in arbitration and regulatory proceedings before the Financial Industry Regulatory Authority and has represented and counseled clients in regulatory, enforcement and criminal investigations before the SEC, FINRA, state securities regulators, the Department of Justice, the FBI and various other governmental and self-regulatory organizations.

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