FYI: FCC Issues Final Rules on Telemarketing, Telephone Calls to Customers, and Related Requirements and Exemptions

As widely reported in the news media, the Federal Communications Commission (FCC) recently issued its latest rules implementing the Telephone Consumer Protection Act of 1991 (TCPA), intending to provide greater consistency with the Federal Trade Commission's (FTC) analogous Telemarketing Sales Rule (TSR), as contemplated by the Do-Not-Call Implementation Act (DNCIA).

 

The FCC's final rules are available at:
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-21A1.pdf

 

Among other things, the new rules:  (1) require prior express written consent for all autodialed or prerecorded telemarketing calls to wireless numbers and residential lines, and eliminate the established business relationship exemption for such calls to residential lines, but maintain flexibility in the form of consent needed for purely informational calls; (2) requires all prerecorded telemarketing calls to allow consumers to opt out of future such calls during the call; and (3) revises the FCC's prior rules to limit permissible abandoned calls on a per-calling campaign basis, in order to discourage "intrusive calling campaigns."

 

First, the final FCC rules require prior express written consent for what the FCC calls telemarketing "robocalls" (i.e., automatic telephone dialing system or a prerecorded voice to deliver a telemarketing message) to wireless numbers and residential lines.

 

Prior express written consent may be given in electronic or digital form if recognized by state contract law, must provide clear and conspicuous consent to future calls by a specific seller, and must impart unambiguous consent to receive telemarketing calls at a specific number.

 

This requirement does not apply to auto-dialer and pre-recorded message calls that do not contain telemarketing messages (e.g., regarding debt collection, bank account balance, credit card fraud alert, package delivery, and other informational or non-commercial communications), if the calls are made to residential landline users.  However, if the calls are made to wireless consumers or other specified recipients, prior express written or oral consent is allowed.

 

Importantly, home loan modification and refinance calls placed pursuant to the American Recovery and Reinvestment Act "generally are not solicitation calls and do not include or introduce an unsolicited advertisement, when those calls are made by the consumer's loan servicer, because the primary motivation of the calling party is to comply with that statute's outreach requirements."

 

However, the FCC notes that challenges to such calls alleging that the primary motivation appears to be sending a telephone solicitation or unsolicited advertisement rather than complying with the Recovery Act, will be considered based on the specific facts on a case-by-case
basis.

 

Also, if a Recovery Act auto-dialed or pre-recorded message call is made to a wireless number, prior express written or oral consent is required.

 

In addition, the final FCC rules eliminate the "established business relationship" (EBR) exemption as it previously applied to auto-dialed and pre-recorded message telemarketing calls to residential lines.  The FCC emphasized that its decision "to eliminate the established business relationship exemption is consistent with the FTC's findings rejecting an EBR exemption and the DNCIA's requirement that the Commission 'maximize consistency' with the FTC's approach in this area."

 

Second, the final FCC rules require telemarketers "to implement an automated, interactive opt-out mechanism for telemarketing robocalls, which would allow a consumer to opt out of receiving additional calls immediately during a robocall."

 

Third, the final FCC rules address abandoned calls and "predictive dialer" systems (i.e., calling systems that initiate phone calls while callers are talking to other consumers and frequently disconnect those connected calls when a caller is otherwise occupied and unavailable to take the next call, resulting in a hang-up or dead-air call). 

 

Intending consistency with the FTC's method for determining whether a telemarketer's "abandoned" call rate is within the lawful numerical limits for such calls, the FCC's final rules require that the three percent call abandonment rate be calculated for each calling campaign. The FCC states this provision is intended to prevent telemarketers from shifting more abandoned calls to certain campaigns, as is possible if calculation is made across multiple calling campaigns.

 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: 4th Cir Holds BK Trustee Imputed Only w/ Knowledge of Officially Recorded Liens, Trustee's Independent/Constructive Knowledge Irrelevant

 

The U.S. Court of Appeals for the Fourth Circuit recently held that a bankruptcy trustee was properly allowed to avoid a lien, ruling that a bankruptcy trustee could only be imputed with knowledge of liens filed in a jurisdiction's official recording index, and that the trustee's independent or constructive knowledge of a lien was irrelevant.   

 

A copy of the opinion is available at: 

http://pacer.ca4.uscourts.gov/opinion.pdf/102027.P.pdf.

 

This appeal arose from an adversary proceeding in which the bankruptcy trustee sought to avoid a lien on a tract of land.  The debtor obtained loan that was purportedly secured by a deed of trust on two parcels of the debtor's land ("Tract I" and "Tract II"), each consisting of multiple lots.  The jurisdiction in which the two tracts were located used a parcel identifier number ("PIN") index as its official recording index, but maintained an unofficial grantor/grantee index as a way to track recording instruments until such time as the instruments were entered on the PIN index. 

 

When the deed of trust was submitted for recording, it included only the PIN for Tract II.  The Tract II lien was thus the only lien recorded under the deed of trust in the official PIN index. 

 

Subsequently, the debtor obtained another loan, and secured the loan with a deed of trust on Tract I that was properly recorded in the jurisdiction's PIN index. 

 

Consistent with the administration of the bankruptcy estate, the trustee later sold some of the lots in Tract I and applied the proceeds of the sale to the properly recorded lien on Tract I.   The lender bank then filed a proof of claim for repayment of the earlier loan based on the deed of trust on both Tract I and Tract II. 

 

Seeking to avoid the lien on Tract I, the trustee filed a motion for summary judgment and claimed that the bank's deed of trust, while properly recorded in the official PIN index as to Tract II, was not so recorded as to Tract I.   In response to the trustee's motion, the bank argued that the trustee had constructive knowledge of the lien on Tract I based on the express terms of the deed of trust, and on notice obtainable through a search of the unofficial grantor/grantee deed index listing the lien on Tract I.

 

Both the bankruptcy court and the district court rejected the bank's arguments, concluding that under section 544(a)(3) of the Bankruptcy Code, the trustee stands in the shoes of a bona fide purchaser, and may therefore rely exclusively on the official recordation index to discover liens, regardless of any independent knowledge that the trustee may possess as to the existence of a lien.  The Fourth Circuit affirmed.

 

As you may recall, the Bankruptcy Code permits a trustee to avoid a lien on a debtor's property that would be voidable under applicable law by a bona fide purchaser at the time of the filing of the bankruptcy.  11 U.S.C. § 544(a)(3).  In addition, the applicable state law in this case (North Carolina) is a "pure race" jurisdiction in which the first to record an interest in land holds an interest superior to all other purchasers of the property, regardless of any notice of conveyances to other purchasers. See N.C. Gen. Stat. § 47-20(a). North Carolina also permits counties to select the PIN recording index as the official recordation index, which the jurisdiction in this case chose to do.   See N.C. Gen. Stat. §§ 161-22(a), 161-22.2(a).  Thus, as the court noted, if a lien is not properly recorded, a bona fide  purchaser takes the property as if no lien exists.

 

The Court of Appeals found unpersuasive the bank's various arguments, including the assertion that the deed of trust substantially complied with state law, because the lien was recorded in the proper county, with the proper legal descriptions, and was properly indexed under the unofficial grantor/grantee index.  The Court ruled that the bank could not demonstrate substantial compliance with the jurisdiction's recording requirement, because the bank had failed to record the Tract I lien on the official PIN index.

 

In addition, the Fourth Circuit rejected the bank's argument that the trustee could not occupy the status of a bona fide purchaser of Tract I under Section 544(a) because the trustee was imputed with notice as to the title status of all property in the bankruptcy estate, including Tract I. 
 
In ruling against the bank, the Fourth Circuit noted, first, that the Bankruptcy Code specifically provides that a trustee "is imputed with only the knowledge imputable to a bona fide purchaser" regardless of  the trustee's knowledge of the lien.  In observing, moreover, that the test under North Carolina law is not whether a bona fide purchaser had knowledge of a lien or whether the trustee in bankruptcy is imputed with such knowledge, but whether the lien was recorded in the official index, the Court concluded that in this case a deed of trust must be recorded in the PIN index in order to be effective against a bona fide purchaser, and thus against a trustee. 

 

Accordingly, as a title search as to Tract I in the PIN index would not have revealed the bank's lien, the Court permitted the bankruptcy trustee to avoid the lien.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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