Modern Day Bank Robbery: Banks Face Increasing TCPA Class Action Liability

Willie Sutton is alleged to have said “I rob banks because that’s where the money is.” The same can be said for plaintiff’s lawyers who over the past several years have filed an increasing number of TCPA class actions against banks and other financial institutions.

Over the past several years banks and other financial institutions have been targeted in numerous putative class actions alleging violations of the TCPA that resulted in multimillion-dollar judgments and settlements. The high value of these settlements illustrates how automated communications can pose significant litigation risks that can be mitigated only through an understanding of the requirements of TCPA and a robust focus on compliance. Banks and other financial institutions often communicate with existing and prospective customers through automated communications for purposes of marketing, customer servicing, and collections—making companies operating in the financial sector frequent targets of claims brought under the Telephone Consumer Protection Act (TCPA).

TCPA Background

Enacted in 1991 to protect consumers from receiving unsolicited telemarketing calls and faxes (and more recently text messages), the TCPA regulates and restricts the manner in which a business may advertise its products and services to consumers or otherwise communicate with its customers. Specifically, the TCPA prohibits the use of an “automated telephone dialing system” or an “artificial or prerecorded voice” to make calls to cell phones without obtaining the recipient’s consent. Certain restrictions apply to telemarketing and non-telemarketing calls alike, including debt collection or informational calls. These same rules apply to banks and other financial institutions.

Class action risk under the TCPA can be considerable. Because the TCPA provides for statutory damages of $500 per violation (and up to $1,500 per willful violation) with no maximum cap on recovery, potential exposure in a TCPA class action can quickly escalate into the millions.

Federal Communications Commission (FCC) regulations interpreting and implementing the TCPA require consent for most automated telemarketing communications. Specifically, prior express written consent is required for autodialed or prerecorded telemarketing calls or texts to cell phones. These requirements also apply to prerecorded telemarketing calls to landlines, and there is no exception for calls to customers with whom the company has an established business relationship. For purposes of the regulations, the term “prior express written consent” means an agreement in writing, with a signature in some form that clearly authorizes the seller to make telemarketing calls or texts using an autodialer or a prerecorded voice.

TCPA Class Actions Continue to Target Banks and Other Financial Institutions

The TCPA continues to raise litigation and compliance challenges across the financial services industry, with scores of lawsuits being filed against banks and other financial institutions each year. These class action lawsuits have challenged both marketing calls and/or non-marketing calls, including servicing and collection calls, and have resulted in several high-dollar settlements. Just over the past year, Wells Fargo settled TCPA class actions for over $17 million. Multimillion-dollar TCPA class action settlements have also been reported recently by, among others, HSBC and Compass Bank. In the Wells Fargo case the complaint alleged that the bank violated the TCPA by improperly sending unsolicited prerecorded messages to cell phones about mortgages, home equity loans, credit card accounts, auto loans, student loans, and fraud alerts. Common, but dangerous, practices for bank communications.

FCC Guidance for the Banking Industry

The FCC has issued specific guidance clarifying that banks and other financial institutions may make automated calls and texts to their customers concerning data breaches without violating the TCPA. Specifically, the FCC created an exemption for calls intended to prevent fraudulent transactions or identity theft, including data security breaches, provided that the messages do not include marketing, advertising, or debt collection, and that each message includes information regarding how to opt out of future messages. Financial institutions are limited to no more than three calls over a three-day period. According to the FCC, these types of calls are intended to address exigent circumstances in which a quick, timely communication with a consumer could prevent considerable consumer harm or mitigate the extent of such harm. The FCC also exempted from the consent requirement calls regarding money transfers, including notifying the recipient of steps to be taken to receive the transferred funds.

Conclusion

The TCPA challenges facing the banking and financial services sector are expected to continue as companies seek to protect themselves from continuing risk of litigation. A strong TCPA compliance program is essential to help understand the type of communications permissible under the Act and to minimize potential liability.

Lewis S. Wiener is a partner and Co-Chair of the Global Financial Services Disputes and Investigations practice at Eversheds Sutherland. He heads the US Telephone Consumer Protection Act (TCPA) group and represents an array of clients in the state, federal, and appellate courts.
Francis X. Nolan, IV is a partner and member of the US TCPA group at Eversheds Sutherland.
Wilson G. Barmeyer is partner and member of the US TCPA group at Eversheds Sutherland.