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Much-Needed TCPA Reform Would Support Small Businesses and Spur Economic Benefits

Growing evidence suggests that existing Telephone Consumer Protection Act (“TCPA”) compliance challenges, and the current TCPA litigation landscape, are increasingly a threat to many U.S. companies – particularly small businesses that have fewer resources and could face financial ruin if targeted by a class action lawsuit.  To help address this issue and support the U.S. economy, Congress and the Federal Communications Commission (“FCC”) should revise the current TCPA framework and facilitate reasonable, practical compliance approaches for companies attempting in good faith to communicate with customers.

Congress enacted the TCPA more than 25 years ago, long before most U.S. households became wireless-only or the existence of now-common technologies such as the smartphone.  The number of TCPA lawsuits, however, has skyrocketed in recent years – making it now the second most sued-under federal consumer protection statute in the U.S.[1]  Meanwhile, the FCC’s convoluted implementation, along with a web of contradictory court decisions, have resulted in an inconsistent TCPA framework that is challenging for many companies to decipher and necessarily exposes them to unwarranted risk (e.g., for inadvertently calling a wireless number that was recently reassigned or wrongly provided).

Under the current framework, businesses across industries are essentially forced to pay out millions in TCPA settlements instead of investing that money into jobs, business operations, infrastructure, or innovation.  Indeed, a recent study found that 3,121 lawsuits that had been filed since the FCC released its July 2015 “Omnibus” Declaratory Ruling and Order, which represents a 50 percent increase in litigation compared to before the FCC’s order.  The litigation affected companies in more than 40 industries, including the health, retail, education, financial, and other sectors.

This skyrocketing TCPA litigation hinders innovation, curtailing companies’ ability to offer new products and services that consumers demand.  It also diverts time and resources from consumer-facing operations, chills critical account communications, and creates substantial costs that are eventually passed on to consumers.  In contrast, the use of advanced calling technologies can provide benefits to both businesses and consumers by, among other things, ensuring that consumers are not subject to improper calls, increasing productivity, and allowing critical regulatory goals to be accomplished more efficiently.  For example, manual dialing creates a heightened risk of human error, which may result in unnecessary calls to the wrong individuals and could even potentially expose companies to liability under other statutes and regulations.

Small businesses, in particular, would benefit from a more clear, streamlined, and practical TCPA framework.  According to the Small Business Administration’s Office of Advocacy, small businesses create seven out of every ten new jobs and employ just over half of the country’s private sector workforce.[2]  However, as the U.S. Chamber of Commerce has pointed out, small businesses that try to comply with the TCPA requirements can still face millions of dollars in liability for a relatively small numbers of faxes or calls.  With potential liability of $500 (or $1,500 if willful) for each communication, a small business that places 5,000 calls over time could face liability of at least $2.5 million.[3]  Thus, a single TCPA lawsuit or settlement can drive small – or even large – businesses to bankruptcy and, in so doing, eliminate key job creators.

In addition, an improved TCPA framework would help keep call center jobs in the U.S.  The research company IBISWorld forecasted that call center industry would grow at an annualized rate of 1.4% to 486,485 workers by 2017 as a result of new technologies and lower costs.[4]  And the industry expects continued growth in the coming years.  However, abusive TCPA litigation could cause companies to reduce their reliance on call centers.  And an overbroad interpretation of the term “automatic telephone dialing system” under the TCPA may lead more legitimate, good faith callers to switch away from live agent call centers to prerecorded messages.

Congress and the FCC can fix these problems and help support economic growth in the U.S. by providing for clear TCPA requirements and reasonable, practical compliance approaches.  Until then, companies—especially small businesses—that attempt in good faith to reach their customers will continue to risk exposure to TCPA class-action lawsuits.

[1] See, e.g., ACA International, Year in Review: Consumer Litigation Filings End 2016 with Surge in TCPA Cases (Jan. 26, 2017), https://www.acainternational.org/news/year-in-review-consumer-litigation-filings-end-2016-with-surge-in-tcpa-cases.

[2] Fast Facts on Small Business, House Committee on Small Business, https://smallbusiness.house.gov/uploadedfiles/april_recess_small_biz_talking_pts.pdf (last visited Sept. 27, 2017).

[3] Statement of U.S. Chamber Institute for Legal Reform, U.S. House of Representatives Committee on the Judiciary Subcommittee on the Constitution and Civil Justice (June 13, 2017).

[4] Report, Hold the line: Offshoring and investment in new technologies will hurt industry profit margins, IBISWorld (August 2017).

This post was originally published on Hogan Lovells’ Focus on Regulation blog.