Robert W. Quinn, Wilkinson Barker Knauer, LLP
Debt collectors of loans made or guaranteed by the federal government took another big hit in late April when the U.S. Court of Appeals for the Fourth Circuit invalidated the federal government debt collection exemption to the Telephone Consumer Protection Act of 1991 (47 C.F.R. § 227) (“TCPA”) which otherwise bars auto-dialed and pre-recorded telephone calls to mobile telephones (as well as pre-recorded calls to landline telephones) on First Amendment grounds. American Association of Political Consultants, Inc. v. FCC, No. 18-1588, 4th Cir. (Apr. 24, 2019).
The TCPA exemption for calls “made solely to collect a debt owed to or guaranteed by the United States” was enacted in the Bipartisan Budget Act of 2015. While the TCPA provisions do not apply to calls made by the federal government, this TCPA exemption, which went into effect in 2016, provided more clarity regarding auto-dialed or pre-recorded collection calls made by financial institutions, debt collectors or other agents of the government pursuing government collection efforts.
In the district court proceeding, plaintiffs had asserted that the statutory exemption constituted an unconstitutional, content-based restriction on free speech in contravention of the First Amendment, and therefore that the entire TCPA should be invalidated. AAPC v. Sessions, 323 F. Supp. 3d 737 (E.D.N.C. 2018). Specifically, the plaintiffs had argued that the statutory exemption created a regime that permitted—and thus unconstitutionally favored—a select group of auto-dialed calls to cell phones based upon the content of the calls themselves. Therefore the ban was inconsistent with the purposes of the statute’s underlying prohibition of auto-dialed and pre-recorded calls and was facially unconstitutional.
The district court agreed with plaintiffs’ contention that the restriction was content-based, but ruled that the exemption survived a strict scrutiny analysis finding that the government had a compelling purpose in protecting the well-being, tranquility, and privacy of the individual’s residence and that the exemption did not detract from the statute’s purpose. Consequently the district court found the exemption lawful and granted the United States’ Motion for Summary Judgment. Id., 323 F. Supp. 3d at 744.
On appeal, the Fourth Circuit affirmed (over the Government’s objection) that the exemption was indeed a content-based restriction and consequently subject to a strict scrutiny analysis. In applying that analysis, however, the Fourth Circuit found the exemption under-inclusive and struck it down. Specifically, the court found that the exemption authorized many of the intrusive calls that Congress intended the TCPA to prevent and that the impact of the exemption deviated from the purpose of the ban itself.
The court rejected the government’s contention that the ban was narrowly tailored, noting that the government had either guaranteed or was owed nearly 80% of all outstanding student debt, involving 41 million borrowers and over $1 trillion in federal student loans. The court stated that when those figures were added to other federal government agency owned or guaranteed debt, involving the Departments of Agriculture, Housing and Urban Development and Health and Human Services, “the exemption is not at all ‘narrow’…”. On that basis, the Fourth Circuit reversed the district court’s holding.
As noted above, the Plaintiffs in the case, all politically-affiliated organizations, had argued that by striking down the exemption, the entire TCPA prohibition related to auto-dialed or pre-recorded calls must fall—the ban itself as well as the exceptions. The Fourth Circuit, however, rejected that contention and merely eliminated the exemption created by the Bipartisan Budget Act of 2015, leaving the balance of the TCPA intact. So for now, at least in the Fourth Circuit, the TCPA is still in effect, but the exemption for autodialed or prerecorded calls “made solely to collect a debt owed to or guaranteed by the United States” is not.