“So You Want to Call My Cell” Contacting Borrowers via Cell Phone for Debt Collection

1. “So You Want to Call My Cell” Contacting Borrowers via Cell Phone for Debt Collection Micheal Kahler Windham Professionals, Inc.

2. Another Title • Mississippi River – from the Headwaters to New Orleans • Clear, Muddy, Somewhat Clear, Real Muddy • Black and White, • No – Fuzzy, • No – Black and White, • No – Fuzzy • Who is in Charge? • Never Ask The Federal Government For Clarification • Watch Your Backside • Cell Phones, Prom Notes and Perkins – Oh My!

3. Our Discussion Today • Communication Laws • Telephone Consumer Protection Act • What is Creating Our Problem Today • The Affect on the Student Loan Collection Industry • What We Can Do • Cell Phone Use Statistics

4. Cell Phone Use In the United States • Over twenty percent of US households have cut the wire and exclusively use cell phones for voice communication. One in five households are cell phone only. • This is now more than those households that rely solely on land based lines (17%). This is the first time since the NCHS has been keeping stats on telephone use that this has occurred (2003 - 2009).

5. Cell Phone Use In the United States • Wireless households have increased 17% from the first half of 2008 • 1/3 of people aged 18-29 are wireless only • Over 60% of adults who share an apartment with roommates are wireless only • Over 40% African American homes are wireless only • 25% of Hispanics are wireless only

6. Cell Phone Use In the United States • Groups associated with lower income according to the data are more apt to live in wireless homes only • Recession has increased the numbers of wireless only homes • Portability has increased the numbers of wireless homes

7. Laws Affecting Communication • Communication Act of 1934 • Establishes the Federal Communications Commission (FCC) • Regulates interstate, international, and maritime communications including radio, television, wire, satellite, and cable. • Jurisdiction covers all 50 States, the District of Columbia, and U.S. possessions.

8. Laws Affecting Communication • Telephone Consumer Protection Act of 1991 • Restricts the use of automated dialing systems, artificial or prerecorded voice messages, SMS text messages received by cell phones, and the use of fax machines to send unsolicited advertisements. • Specifies technical requirements for fax machines, auto dialers, and voice messaging systems – principally with provisions requiring identification and contact information of the entity using the device to be contained in the message.

9. Laws Affecting Communication • Telephone Consumer Protection Act of 1991 • General provisions • Unless the recipient has given prior express consent, the TCPA and the FCC rules under the TCPA generally require: • Solicitors may not call residence before 8am or after 9pm local time • The solicitor must maintain a “Do Not Call “ (DNC) list, which must be honored for 5 years • Solicitors must provide their name, the name of the person or entity on whose behalf the call is being made, and a telephone number or address at which that person may be contacted. • Solicitation calls cannot be made to residences with artificial voices or recordings

10. Laws Affecting Communication • TCPA • General Provisions continued: • Calls cannot be made with artificial voices or recordings to cell phones or to any service in which the recipient is charged for the call. • Prerecorded or autodialed calls cannot engage two or more lines of a multi-line business or to any emergency number. • In a related section, unsolicited advertising faxes are also prohibited. • In the event of a violation of the TCPA, individuals are entitled to collect damages directly from a solicitor for $500 to $1,500 for each violation, or recover actual monetary loss, whichever is higher.

11. Laws Affecting Communication • TCPA Limitations • Ineffective at proactively stopping unsolicited calls in that the consumer had to request of each telemarketer to be put onto that telemarketer’s do-not-call list • This changed as a result of the Do-Not-Call Implementation Act’s establishment of the Do Not Call Registry and adoption of the National D0-Not-Call list by the FCC in 2003

12. Laws Affecting Communication • The CAN-SPAM Act made a minor amendment to the TCPA to explicitly apply the TCPA to calls and faxes from outside the US. • Portions of the TCPA related to unsolicited advertising faxes were amended by the Junk Fax Prevention Act of 2005

13. Problem Areas • Section 227(1)(A)(iii), the TCPA prohibits using any automatedtelephone dialing system or an artificial or prerecorded voice to call “any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service […] or any other service for which the called party is charged for the call.”

14. How Does This Affect The Student Loan Collection Industry • FCC first recognized telephone calls on behalf of creditors to recover payments for goods and services are not telemarketing. • In 2003, the FCC changed its interpretation of the definition of the term “autodialer” in order to limit the telemarketers’ use of the technology. • Original intent of the TCPA and FCC regulation did not include credit grantors and debt collectors – change drew the industry into the ban intended for telemarketers.

15. How Does This Affect The Student Loan Collection Industry • 1992 FCC rules that “calls delivering artificial or prerecorded messages to residences were prohibited, absent the express consent of the called party.” In the 1992 TCPA Order, the FCC concluded that an express exemption for debt collection calls to residences was unnecessary as such calls fall within the exemptions adopted for commercial calls which do not transmit an unsolicited advertisement and for established business relationships.

16. How Does This Affect The Student Loan Collection Industry • 1995 FCC clarified that: - prerecorded debt collection calls are exempted from Section 227(b)(1)(B) of TCPA prohibiting prerecorded or artificial voice messages to residences -debt collection calls not directed randomly or sequentially generated telephone numbers do not require and identification message

17. How Does This Affect The Student Loan Collection Industry • 2003, FCC affirmed that it unlawful “to make any call using an automatic telephone dialing system or an artificial or prerecorded message to any wireless telephone number” but agreed that debt collection calls could be made with the following provisions: • In the 1992 Order the FCC determined that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.” • “To insure that creditors and debt collectors call only those consumers who have consented to receive autodialed and prerecorded message calls, we (the FCC) conclude that the creditor should be responsible for demonstrating that the consumer provided prior express consent.”

18. How Does This Affect The Student Loan Collection Industry • December 2007 the FCC clarified “that autodialed and prerecorded message calls to wireless numbers that are provided by the called party to a creditor in connection with an existing debt are permissible as calls made with the ‘prior express consent’ of the called party.”

19. How Does This Affect The Student Loan Collection Industry • Without written “prior express consent” from the debtor there is potential for violation of the law • Cell phone numbers obtained during the collection process cannot be dialed with a dialer • The TCPA does not apply to land lines. Autodialers may be used. • Cell phone numbers may be called if dialed individually – the old fashioned way.

20. How Does This Affect The Student Loan Collection Industry • ACA Petition to the FCC • “Collectors, face potential injury from this uncertainty, including the risk of civil litigation and the risk of government enforcement by the Commission. • ACA Petition to the FCC • Limited amendment to the TCPA to preserve the use of autodialers to call consumers’ cell phones to recover payments for goods and services. • Clarification of the Act is needed to indicate that application of the TCPA regarding use of autodialers by creditors and collectors has not changed and is needed to prevent legal action • Further clarification of “expressed prior consent” is needed

21. How Does This Affect The Student Loan Collection Industry – Other Laws • Fair Debt Collection Privacy Act (FDCPA) • Privacy Protection for Consumers • Section 808(6) Prohibits a debt collector from causing charges to be made to a person for any communication (including cell phone) if the collector conceals the true purpose of the communication. See U.S.C. Section 1692f(6).

22. How Does This Affect The Student Loan Collection Industry-Other Laws • Fair Debt Collection Privacy Act (FDCPA) • Privacy Protection for Consumers (cont) • Section 805(a) Prohibits a debt collector from communicating with a consumer in connection with the collection of any debt at any unusual time or place or at a time or place known or which should be known to be inconvenient to the consumer. The consumer can inform the collector that contacting the cell phone is inconvenient and the collector must cease any further communication with the debtor by way of the cell phone.

23. How Does This Affect The Student Loan Collection Industry-Other Laws • Fair Debt Collection Privacy Act (FDCPA) • Privacy Protection for Consumers (cont) • Section 805(c) prohibits a debt collector from engaging in any further communication with a consumer, including cell phone communication, if the consumer notifies the collector in writing that the consumer refuses to pay a debt or that a consumer wishes the collector to cease further communication with the consumer.

24. How Does This Affect The Student Loan Collection Industry-Other Laws • Fair Debt Collection Privacy Act (FDCPA) • Privacy Protection for Consumers (cont) • Section 806(5) prohibits a debt collector from causing a telephone to ring or from engaging any person in telephone conversations repeatedly or continuously with the intent to annoy, abuse, or harass any person at the called number. The section applies to cell phone calls as well as calls made to a land line.

25. What do We Do • For the time being, focus on the idea of “prior express permission” or required authorization (CA) • Obtain permission to use cell phones for contact purposes. • Make sure to be complete in the verbiage of the statement that you are requesting the student to sign. • Make sure that this happens in the admissions or registration process. • Make sure that there are statements in printed materials indicating that you will use the number provided to make contact with the student. • Work hard to accompany all receivables with a promissory note and written authorization

26. Information Sources • Telephone Consumer Protection Act of 1991 www.law.cornell.edu/html/uscode/html/uscode47/usc_sec_47_00000227----000-. • ACA International – www.acainternational.com • Center for Disease Control and Prevention www.cdc.gov/nchs/data/nhis/earlyrelease/wireless200812 • Federal Trade Commission (FCC) www.fcc.gov • FCC Consumer Facts www.fcc.gov/cgb/consumerfacts/tcpa

27. Information Sources • National Council of Higher Education Loan Programs (NCHELP) www.nchelp.org • US Department of Education www.ed.gov

28. Questions Micheal Kahler Windham Professionals, Inc. www.windhampros.com mkahler@windhampros.com 888-747-0919 314-420-4876