What was the most important debt collection issue for you in 2014?
The most common answer to this question is compliance. It holds top-of-mind awareness for the majority of debt management professionals across all markets, from both first and third party organizations collecting debt.
One of the most interesting conversations I heard on this topic took place on at the end of the year, when David Kaminski, partner at Carlson & Messer LLP, spoke at a webinar presented by Collections and Credit Risk and FICO. David specializes in defending banks, collection agencies and creditors in all areas of financial services litigation, and is a recognized authority regarding consumer litigation laws. He routinely defends clients in investigations and proceedings initiated by the CFPB, FTC and FCC, as well as other federal, state and regulatory agencies.
When asked what issue or topic he sees as most important from a compliance standpoint, David chose “Vicarious Liability.” Here’s what he said:
“The basic definition of Vicarious Liability is a situation where one person is held responsible for the actions or omissions of another person who is acting on the first person’s behalf, such as a vendor or contractor. It imposes liability upon the first party for acts of another under the common law doctrine of agency: if the first party was directly involved in conduct giving rise to an illegal act itself, or retained control over the activities of the other party acting on its behalf, or should have been more diligent in supervising the other party’s activities. There were several important cases involving vicarious liability in 2014.
“The case of Thomas v. Taco Bell involves the Chicago Area Taco Bell Local Owners Advertising Association, whose members include franchisees and Taco Bell itself. The Association retained an advertising agency to organize a promotion, which included text messages. The advertising agency enlisted an outside vendor to handle the text messaging logistics. The plaintiff, Thomas, sued the advertising agency as well as the Association and Taco Bell for sending text messages without prior express consent under the Telephone Consumer Protection Act (TCPA).
“On July 2, 2014, the 9th Circuit Court of Appeals ruled that Taco Bell Corp. was not vicariously liable for the acts of the actual sender of its text message campaign because Taco Bell Chicago Association and its vendor, Ipsh!net, Inc. acted independently of Taco Bell Corp. in sending the text messages. The plaintiff did not present “any evidence ... demonstrating that Taco Bell [Corp.] controlled the actions of these entities with respect to the campaign.” The key issue was “control”.
“In October 2014, the 9th Circuit in Gomez v. Campbell-Ewald spoke again on the issue of vicarious liability. In Gomez, plaintiff alleged that defendant and marketer Campbell-Ewald instructed or allowed a third party vendor to send unsolicited text messages on behalf of the U.S. Navy and that the plaintiff was contacted without consent. This time, the 9th Circuit held the defendant vicariously liable for TCPA violations of another where the plaintiff established an agency relationship, as defined by federal common law, between the defendant and a third-party. The Court agreed with the FCC that federal common law of vicarious liability applies to TCPA section 227(b) and 227(c) claims.
“The Gomez case is a game-changer. The expansion of liability to any person and vicarious liability under the TCPA is not limited to telemarketing.
“In May of 2013 a Federal Communications Commission (FCC) order suggested that a creditor could be vicariously liable under a broad range of agency principles. Examples of vicarious liability that may indicate liability include:
- The seller allows the agency access to information and systems that normally would be within the creditor exclusive control.
- An outside agency can enter customer information directly into the creditor’s systems.
- The creditor gives authority to use creditor’s trade name, trademark, or service mark.
- The creditor has the right to review and audit the agent’s system, documents, compliance protocols, right of approval of scripts, and so on.
To read more about compliance in Collection and Recovery, download Can Your Collections Team Support Your New Compliance Framework?
More information from David’s "Resolving Consumer Complaints in the Regulation Age" presentation will be shared in an upcoming blog.