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$267M Verdict Highlights TCPA Risks in Calling Skip Traced Numbers

$267M Verdict Highlights TCPA Risks in Calling Skip Traced Numbers with a Dialer

On September 9, 2019, the judge entered a final judgment in the TCPA case, McMillion v. Rash Curtis & Associates, 4:16-cv-03396 (N.D. Cal.) to the tune of a whopping $267 million.

The verdict, issued by the jury in June 2019, determined that over 534,000 calls using auto dialers and pre-recorded messages were made by the local California collection agency without consent of called parties. The case involved two main categories: 1) individuals called through skip traced numbers and 2) individuals who never had an account placed with the agency.

Historically, TCPA cases are notoriously difficult to certify, resulting in mountains of work sifting through account notes to verify consent. Most cases are denied certification.

But in this case, because of the use of skip traced numbers, the violation was certifiable by the judge, resulting in the monumental verdict that will likely render the 42-year-old debt collection agency bankrupt.

What is the TCPA?

The Telephone Consumer Protection Act of 1991 (TCPA) was signed into law as a response to a rise in unregulated and harassing telemarketing calls and faxes. It restricts telephone solicitations and the use of automatic telephone dialing systems, including pre-recorded messages, auto dialers, text messages and fax, without explicit customer consent.

Without consent, companies must follow Federal Communications Commission (FCC) solicitation rules and honor the Federal Trade Commission (FTC) National Do Not Call Registry, otherwise they may be sued.

How does this relate to the Debt Collection industry?

The FCC has determined that debt collection calls are not telemarketing calls. Therefore, auto dialers and pre-recorded calls may be used without consent to residential wired phones, where they do not include telemarketing messages; however, prior express consent must be acquired before calling wireless numbers with an auto dialer or pre-recorded message.

“Prior express consent must be acquired before

calling wireless numbers with an auto dialer.”

Creditors and collection agencies hoping to recover debt from customers must be careful to ensure that they have explicit consumer consent to call or text cell phones, and include opt-out language, otherwise they may be liable for TCPA violation.

The FCC does allow the use of cell numbers when provided to the creditor for use in normal business communications, such as in credit applications or agreements. However, consumers may revoke consent at any time.

Why was this case different?

In this case, the collection agency, Rash Curtis & Associates, was calling skip traced numbers (numbers found through investigation and search) and using an auto dialer with a pre-recorded message.

Since the numbers were found using skip tracing, rather than provided by the creditor as part of an agreement or application (which, if you recall, counts as consumer consent under the TCPA), the judge was able to certify that no prior express consent was given for these numbers, resulting in the devastating multi-million-dollar judgment.

THE TAKEAWAY FOR DEBT COLLECTORS: Skip traced numbers should be called manually and never through an auto dialer, as the TCPA risks are too high.

THE TAKEAWAY FOR BUSINESSES: It may be advisable to include a section for use of cell phones for collections efforts in your credit application or agreement, so that written consent is obtained from the start. You can then provide wireless numbers to your collection agency to be used in calling campaigns, without the TCPA risk.

Compliance is our top priority

At Cedar Financial, we take careful steps to ensure strict compliance with all laws and regulations – state, national and international – at all times. A member of ACA International, we adhere to the highest standards possible, maintaining a code of ethics for fair, but firm collections practices that put your customers first.

In order to stay TCPA compliant, we review accounts when they are first placed with us to see if there is a written agreement (application, agreement, etc) with the debtor that serves as sufficient consent to place the wireless number on an auto dialer. If no agreement exists, we put measures in place to ensure the number is not called using an ATDS without express prior consent of the called party. In addition, we never call skip traced numbers or individuals who never had an account placed with us using an auto dialer or pre-recorded message.

We want to protect your interests and those of your customers in everything we do. To learn more about our compliance policies and practices, contact us today.

*The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.

California SB 616 Makes It Harder for Collectors to Enforce Judgments

California SB 616 Passes, Making It Harder for Debt Collectors to Enforce Judgments

On September 10, 2019, California bill SB 616 was passed 48 to 23, making it more difficult for debt collectors to enforce judgments in the state.

Automatic exemption for bank levies

The bill, initially introduced February 2019 by Senator Bob Wieckowski (D-Fremont), creates an automatic exemption for the first $1,724 in a consumer’s bank account for bank levies. The result: collectors may have a harder time collecting on judgments.

RMAi, Encore and the California Collectors Associations expressed disappointment following their failed attempt to block CA SB 616 from passing. Encore stated they thought they had the numbers leading up to the vote.

The provisions of the bill shall go into effect September 1, 2020.

Recover more accounts, pre-legal

With an increasing number of proposed laws that favor consumers over creditors, it’s more important than ever to focus on ethical, amicable collection efforts.

At Cedar Financial, we believe communication is key to success. Our courteous, knowledgeable team of collectors is fair, but firm, using top negotiation techniques to find a fitting solution for your unresolved accounts.

To learn more about our Consumer Debt Collection services, visit or contact us today.

*The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.

What the Small Business Reorganization Act of 2019 Means for Creditors

Small Business Reorganization Act of 2019 “Reorganizes” Ch. 11 Bankruptcy Proceedings in Favor of Debtors

On August 23, 2019, the Small Business Reorganization Act of 2019 (SBRA) was signed into law, creating “Subchapter V” in Chapter 11 of the Bankruptcy Code as part of an effort to streamline the structuring process for small businesses (defined as those whose total noncontingent liquidated secured and unsecured debts do not exceed $2,725,625). The new law will go into effect February 19, 2020.

What does this mean for creditors?

Harder to contest Chapter 11 bankruptcy cases

The SBRA makes it more difficult for creditors to contest small business Chapter 11 cases. It favors small business debtors by eliminating the Absolute Priority Rule (APR), which previously required full payment to unsecured creditors for debtors to retain ownership of assets.

The APR will continue to apply for secured creditors.

While this new law only applies to businesses whose debts are less than $2,725,625, debtor businesses may qualify by paying down debts at negotiated discounts, since contingent and unliquidated debts are not calculated in the total.

What’s changed?

Before SBRA:

Previously, debtors would be unable to retain ownership of their business without paying creditors unless: 1) the class of creditors voted to accept the plan, or 2) the equity holder paid a “new value” to the debtor business in a substantial and essential amount.

Because debtors were not able to pay a large amount upfront in cash, they would often attempt to negotiate to buy back ownership, offering to provide new value in payments over several years. Thanks to the immediacy of the APR, these attempts would mostly be unsuccessful, with the result that over 90% of Chapter 11 cases would transfer to Chapter 7 liquidation proceedings instead.

After SBRA:

Without the APR in place, debtors can retain ownership of its assets without paying unsecured creditors in full, which means they are more likely to be successful in reorganizing and creditors are less likely to receive substantial payment.

The silver lining: fewer preference lawsuits

It’s not all bad news for creditors. The SBRA also makes changes to Preference Laws that favor creditors by increasing the threshold and due diligence requirements for preference lawsuits.

Under current law, trustees and debtors in possession can file lawsuits to recover preferential transfers made in the 90 days before the bankruptcy was filed, or one year, for insiders. If the amount was less than $13,650, then they would have to file a lawsuit to recover the transfer in the federal district where the defendant resides, rather than the bankruptcy case district.

Under SBRA, the threshold is raised from $13,650 to $25,000 for non-insider defendants, and the trustee or debtor in possession is required to exercise reasonable due diligence, taking into account “a party’s known or reasonably knowable affirmative defenses.”

Prohibitive costs and logistics generally prevent filing of preference suits outside of the bankruptcy case district, so raising the threshold effectively protects most transfers $25,000 and under from recovery. The new due diligence requirement will also help to reduce the number of preference lawsuits.

Actions creditors can take

In light of the new law, creditors and their attorneys, when settling lawsuits with businesses, should:

  • Insist on liens upon assets with equity, including during contract negotiations;
  • Insist upon entry of a judgment – or, at the very least, an admission of liability – exceeding $2,725,625 in order to disqualify the business from Subchapter V;
  • Obtain admissions of wrongdoing in the settlement agreement, since the same debts that are non-dischargeable under other chapters of the Bankruptcy Code remain so under Subchapter V;
  • Lean more towards larger transactions (exceeding $2,725,625) instead of smaller ones;
  • Focus on anything that may create a lien or property interest, such as a writ of attachment, lis pendens, or judgment lien, as these will increase the chance of a substantial payment.

In order to find more successful outcomes under the new Subchapter V, creditors should be more selective about extending credit, insist on obtaining liens wherever possible and monitor the assets that secure the liens on a regular basis.

Make More Informed Decisions with Cedar Financial

Business Credit Reporting

Cedar Financial offers Global Business Credit Reporting, Skip Tracing and Investigative Services to help you make more informed decisions about your business transactions.

In light of SBRA, knowing your customers is more important than ever to reduce potential credit risks. You don’t want to be left in the dust if your trusted business companion decides to file for bankruptcy.

Get the financial knowledge you need to put your best foot forward and maximize your profits. Ask us for a sample credit investigation report today.

The Best Legal Representation, Anywhere

When you place your claims with Cedar Financial, we do everything we can to resolve your accounts amicably, without litigation. But in the event, it comes to that, you’re in good hands – no need to hire a separate commercial debt collection lawyer.

Our clients receive access to full legal support through our in-house counsel and vetted creditor’s rights attorney network for the most trusted legal representation around the globe.

We can evaluate your accounts, review collectible assets and recommend the best course of action for potential legal proceedings. Every case receives the same close monitoring, management and follow-up as our in-house collections accounts, so you don’t have to deal with anyone else.

For more information about our services, contact our representatives at 800-804-3353.

*The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.