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Hold the Phone! The Telephone Consumer Protection Act May Regulate—and Expose You to Liability For—Routine Contact With Customers.



The ATM celebrated its golden birthday yesterday. The first one opened on June 27, 1967, at a Barclay’s branch in London, and it’s since become a cornerstone of modern retail banking.

Fifty years later, the ATM isn’t the only way that consumers “withdraw” cash from their banks and credit unions. In the United States, plaintiffs’ consumer lawsuits cost the financial services industry billions of dollars each year. And the Telephone Consumer Protection Act is fast becoming a cornerstone of modern plaintiffs’ lawsuits.

What is the TCPA?

The TCPA is a federal law that restricts the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages, and fax machines. Congress passed the TCPA in 1991 after telemarketers began using automatic dialers to contact consumers on their home landlines. After answering these so-called robocalls, consumers heard a prerecorded message advertising a product, service, or even political candidate. The deluge of robocalls angered consumers, who considered them an invasion of privacy, and from that outrage the TCPA was born. It has since been updated to include calls and texts to cell phones.

In relevant part, the TCPA prohibits businesses from “making any call . . . using any automatic telephone dialing system . . . to any telephone number assigned to a paging service or cellular telephone service.” 47 U.S.C. § 227(b)(1)(A)(iii). TCPA violations can be costly: the law provides mandatory damages of at least $500 per call or text, which can increase to $1,500 per call or text if the business does so willfully and knowingly.

The only exception to this restriction is when the business has the “prior express consent” of the recipient. The consent must be unambiguous, which requires a “clear and conspicuous disclosure” that the customer will be contacted using automated dialers. At one time the TCPA also contained a broader “prior business relationship” exception (i.e., implied consent based on past purchases), but that exception was repealed in 2013.

The TCPA crosses wires with financial services companies

The TCPA intersects with the financial services industry in a number of ways. A bank might text a customer to notify its customer that his or her checking account has a low balance. A credit union could solicit a deposit account member about its auto-loan rates. Or a credit card company might use an automatic dialer to help collect a past-due balance. Any of these could result in liability, and the risk of class-action lawsuits—which aggregates the damages of hundreds or thousands of consumers—makes defending TCPA claims an expensive prospect. In just the past few years, financial services companies have agreed to multimillion-dollar payouts to settle TCPA claims, including Chase ($34 million), Citizens Bank ($4.5 million), and Bank of America ($1 million).

Hang up on potential TCPA claims

Financial services companies can mitigate against potential TCPA claims in several ways. The best way is to avoid using automated communication systems altogether. But if that’s not feasible, the next best protection is to obtain the customer’s consent to receiving calls and texts beforehand. This permission—what the law calls “prior express consent”—is most easily obtained when the customer provides his or her cell number on an account application. The application should expressly disclose the possibility that the phone number will be used to contact the customer about his or her account using automated means.

Other best practices include:

  • Ensuring that disclosures about the use of a consumer’s number are clear, conspicuous, and accurate.
  • Allowing consumers to opt out of automatic calls and texts in account-opening documents
  • Requiring servicers that contact a financial services company's customers to comply with the TCPA and indemnify the company against claims resulting from the servicer’s customer contacts. The financial services company may be held responsible for TCPA violations committed by the servicer if a court determines that the company controlled and/or directed the method and manner of communications.
  • Keeping complete and accurate records of consumer consent for at least four years (the TCPA’s statute of limitations) after each automatic contact.

These simple steps can help avoid the headaches associated with defending TCPA claims and prevent a financial institution from unwittingly becoming an ATM for the plaintiff’s bar.


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