The Federal Trade Commission recently announced that it had settled a case representing its first action challenging a debt collector’s use of text messages.

In its complaint, the FTC alleged that the defendant debt collectors had violated the Fair Debt Collection Practices Act (FDCPA) by sending text messages to consumers’ mobile phones that failed to disclose that the sender was a debt collector and, when the message was the initial communication, that any information obtained would be used for collection purposes. The FTC also claimed that the defendants violated the FDCPA by failing to provide the validation notice required by the FDCPA and sending text messages to third parties for purposes other than obtaining location information. The FTC further charged that the text messages constituted deceptive acts and practices in violation of the FTC Act because the messages represented that they were sent by or on behalf of attorneys.

In addition to imposing a $1 million civil penalty and prohibiting the defendants from sending text messages that did not include the required disclosures, the settlement requires the defendants to obtain a consumer’s “prior express consent” before sending text messages. The settlement order defines “express consent” to mean that before sending a text message:

  • The defendants or the creditor to whom a debt is owed must clearly and prominently disclose that the consumer may receive collection text messages on a mobile phone number provided to the original creditor or the defendants in connection with the debt.
  • The consumer has taken an additional affirmative step, such as providing a signature, that indicates the consumer has agreed to receive such messages.

In defining “express consent” to require an express disclosure that a mobile phone number may be used for collection text messages, the FTC appears to be imposing a disclosure obligation that is not part of the Telephone Consumer Protection Act’s (TCPA) “express consent” requirement. The TCPA prohibits non-emergency prerecorded calls to a mobile phone unless the call is “made with the prior express consent of the called party.” The Federal Communications Commission has ruled that provision of a mobile phone number to a creditor as part of a credit application is sufficient evidence of “prior express consent” by the mobile phone subscriber to be contacted at that number about the debt by the creditor or a debt collector.

The debt collection industry also continues to face increased scrutiny from the Consumer Financial Protection Bureau. Ballard Spahr’s Consumer Financial Services Group has created a team of lawyers who are assisting debt collectors and debt buyers to prepare for CFPB examinations and respond to CFPB civil investigative demands. In addition, lawyers in the Group regularly consult with their clients engaged in consumer debt collection on compliance with the FDCPA and state debt collection laws.

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com, Debt Collection Task Force Chair Christopher J. Willis at 678.420.9436 or willisc@ballardspahr.com, Glen P. Trudel at 302.252.4464 or trudelg@ballardspahr.com, Stefanie H. Jackman at 678.420.9490 or jackmans@ballardspahr.com, or Heather S. Klein at 215.864.8732 or kleinh@ballardspahr.com.


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