Budget Deal Includes Autodialer Provision for Federal Debt Collectors

The Washington Post reported yesterday that the latest congressional budget deal includes a provision to let companies collecting federal student loans (or other debts guaranteed by the government) call cellphones using auto-dialers.

The proposed amendment is to Section 227(b) of the Communications Act of 1934 (47 U.S.C. 227(b), Restrictions on the Use of Telephone Equiment):

RESTRICTIONS ON THE USE OF AUTOMATED TELEPHONE EQUIPMENT.– (1) PROHIBITIONS.–It shall be unlawful for any person within the United States– (A) to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice–

…(iii) to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call;

The amendment in Sec. 301. Debt Collection Improvements adds “…,unless such call is made solely to collect a debt owed to or guaranteed by the United States” after “charged for the call,” and makes other similar adjustments. The provision includes a deadline of “not later than nine months after the date of enactment of the Act, [the FCC] shall prescribe regulations to implement the amendments made by this section.”

The Post reports that the Department of Education argues this change is needed in order for its servicers to have a better chance of keeping borrowers – who are more likely than older consumers to only have mobile phones – on track with payments.  NCLC’s Margot Saunders argues that this change will subject borrowers to harassment and cell phone charges.

Most reports, including this one on The Hill, predict that the budget deal will pass The House today. Senate Minority Leader Harry Reid (D-Nev.), as well as the White House, supports the “imperfect” two-year deal, which raises the debt limit, avoids a government shutdown, and supposedly gets the country out of a crisis-to-crisis management pattern.

This emerges as the annual Project on Student Debt report is released from the Institute for College Access & Success (TICAS), which shows that students graduating in 2014 had an average of $28,950 in debt, up just slightly from $28,400 in 2013. While this slowdown is promising, the report notes that in the ten years TICAS has tracked student debt, the amount has increased by 56% — much faster than inflation.

Congress – especially Democrats – wants to do something about this. Earlier this week, Sen. Elizabeth Warren (D-Mass.) and Sen. Amy Klobuchar (D-Minn.) held a session on “College Affordability and the Student Debt Crisis.” And it’s a hot topic for presidential candidates. This report on USNews.com details the leading candidates’ positions on how to tackle student debt.

insideARM Perspective

Wow. So much to say on this.

I predicted in July that someone in government would take some action once they realized that the FCC’s TCPA Order actually applies to them as well as debt collectors and other legitimate businesses. While the article I wrote then related to calls to constituents by members of Congress, this proposal slipped into the budget deal is an even better example of the double standard we see related to debt collection rules; tie the hands of legitimate business (and consumers, by the way), but loosen the reins for government. Consumers who owe debt to non-government entities are no different than consumers who have student loan debt.

Passage of this provision would make interesting fodder for the lawsuit filed by ACA International and others against the FCC regarding the Commission’s July 10, 2015 Declaratory Ruling and Order.

On a related note, the Supreme Court is considering hearing the case of a consumer who has declared bankruptcy, and has been trying to get his student loans forgiven along with his other debts. We’ve published another article today, by Kaulkin Ginsberg, on the tests used by the courts to determine whether a debtor qualifies to have his debt erased in bankruptcy.

Of course, discharging debts backed by the federal government ultimately costs taxpayers who do pay their bills. Which I suppose is why they made the distinction in the first place that student loans shouldn’t be discharged in bankruptcy. So… I guess it’s easy for lawmakers to understand the argument about how unpaid debts hurt the larger economy, but when it comes to unpaid debts to private companies, well, the consumers who will foot that bill are somehow from another planet.

But I totally digress.