4th Circuit: TCPA Debt-Collection Exemption is Unconstitutional

On April 24, 2019, the U.S. Court of Appeals for the Fourth Circuit held that the debt-collection exemption to the Telephone Consumer Protection Act’s (TCPA) automated call ban is an unconstitutional violation of the First Amendment.

In their action against the FCC and Attorney General of the United States, the plaintiffs challenged the TCPA’s automated call ban, alleging that it violated the Free Speech Clause of the First Amendment.  The TCPA’s automated call ban prohibits phone calls to cell phones that use “any automatic telephone dialing system or an artificial or prerecorded voice.”  One of the three statutory exemptions to the ban is the debt-collection exemption, which exempts calls to cell phones made solely to collect debt owed to or guaranteed by the U.S. government.

The plaintiffs argued that the debt-collection exemption unconstitutionally favors a select group of otherwise prohibited automated calls to cell phones, calls made to collect on debt owed to or guaranteed by the federal government.  The Free Speech Clause of the First Amendment prohibits the government from restricting speech based on the content of that speech unless the restriction passes a strict scrutiny review, which requires the restriction to further a compelling government interest in a narrowly tailored manner.  Whether a restriction is content-based depends on the communicative content of the speech. 

The district court granted summary judgment in the government’s favor.  The court found that, while the debt-collection exemption to the automated call ban is a content-based restriction on free speech, the exemption satisfies strict scrutiny since it does not hinder the automated call ban from furthering the compelling government interest of protecting “the well-being, tranquility, and privacy” of American consumers in a narrowly tailored manner.

On appeal, the Fourth Circuit agreed that strict scrutiny was the right standard of review as the exemption facially distinguishes between phone calls on the basis of their content.  However, the Fourth Circuit disagreed that the exemption passed strict scrutiny because the exemption undermines the privacy protections underlying the automated call ban and explained that the exemption is not narrowly tailored.  In theory, the exemption is limited by the number of debtors owing loans guaranteed by the federal government, but millions of Americans are debtors to such loans.  Therefore, the court found that the exemption has an expansive reach and interferes with the privacy of millions of American consumers by authorizing a nearly unlimited proliferation of disruptive and intrusive automated debt-collection efforts.

Nonetheless, the Fourth Circuit reasoned that given the severability clause of the Communications Act to which the TCPA is part of and the U.S. Supreme Court’s strong preference for severance, the debt-collection exemption is struck but the rest of the automated call ban is not affected.  The court remanded the case to the district court for further proceedings consistent with its opinion.