Why Are TCPA Cases Against ARM Firms Rising as FDCPA Cases Fall?

The number of lawsuits filed in 2012 against debt buyers and collectors claiming violations of the Fair Debt Collection Practices Act (FDCPA) continued to track well below 2011 numbers in the first part of November, according to data released this week by WebRecon, LLC.

If the pattern holds, as it has all year long, FDCPA lawsuits filed in 2012 should be around 6 percent lower than in 2011. This would be after years of significant increases in the cases.

But lawsuits claiming violations of the Telephone Consumer Protection Act (TCPA) are up significantly in 2012 compared to last year. In the latest WebRecon report, TCPA suits are up 63 percent from the same point in 2011.

So why have consumers and their attorneys shifted their focus from the FDCPA to the TCPA.

WebRecon CEO Jack Gordon recently posed this question on the insideARM.com discussion forum. And while the thread quickly devolved into schoolyard-style histrionics, the first two replies provide valuable insight into possible answers to the question.

The first reply notes a communication preference shift that everyone in the industry has been well aware of for years:

I can tell you our dialer contact is in the basement without being able to auto dial cell phones. Boo TCPA.

As more consumers move to a mobile-only phone environment, debt collectors have found it harder to make right part contacts. Under current interpretations of the TCPA, the safest way to contact a mobile number is by manually dialing it (i.e., not using an autodialer). This, of course, leads to fewer contacts.

With fewer contacts come fewer FDCPA cases. With more mobile numbers dialed come more TCPA lawsuits, regardless of merit.

But there is also another reason why TCPA suits might be up, according to the next reply in the thread:

As a consumer who has sued debt collectors in the past, I can tell you that the TCPA with the advent of the Soppet decision in May has been more lucrative to sue under. FDCPA litigation is capped as you know at $1000, but the TCPA is endless.

Ah, money. Let’s not forget why consumer attorneys target ARM companies in the first place.

What is this Soppet decision all about? The case was covered for insideARM by Alan Kaplinsky, Chair of the Consumer Financial Services Group at Ballard Spahr LLP. Kaplinsky summarized the ruling (by the Seventh Circuit Court of Appeals) by noting that the Court “held that a prior subscriber’s consent does not serve as ‘the prior express consent of the called party’ required by the TCPA for autodialed, non-emergency calls to cell phone numbers.”

Kaplinsky also agreed in his conclusion with the discussion forum reply, noting that available penalties may be a driver in a higher volume of TCPA cases. “We continue to see a high volume of class actions against companies alleging TCPA violations,” he wrote. “In part, this is because the penalties are draconian. Violations can yield damages equal to a minimum of the greater of $500 or actual damages per violation, triple damages for willful violations, and unlimited class action liability.”

So there are two possible reasons for a rise in TCPA cases vs. a decline in FDCPA suits: a changing consumer contact environment that puts legal ambiguity at the forefront when contacting mobile numbers and a statute with higher possible payouts becoming the preferred target for consumers.

Editor’s Note: Do you have questions about the TCPA? We have a resource. insideARM.com recently published Collection Law Overview: A Look at the TCPA. Learn best practices and relevant case law, as well as other stuff you might not have known about the statute. Check it out.