When Worlds Collide: Conflicting Federal and State Regulations on Customer Contact


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The landscape of regulations affecting how businesses reach their customers continues to become increasingly complex, as laws like the Telephone Consumer Protection Act (TCPA) are updated and new mandates from federal and state regulations go into effect. This creates a swirl of confusion as companies try to figure out which rules apply for their industry and their outreach to customers. And not reaching out to customers is no longer an option—customers expect and often demand more proactive outreach from the companies they do business with. So how do you deal with different regulations that might conflict?

In an ideal world, I’m guessing that anyone in the customer contact business would gladly settle for a single federal law that clearly sets forth the rules of the road. If such a law balanced the interests of consumer privacy with the need for companies to communicate with their current and prospective customers, even better.

Please excuse me if I am interrupting your search for flying pigs.

There is little chance of the passage of federal legislation that will blend the alphabet soup of HIPAA, TCPA,TSR, and other laws into one set of rules. On top of that, a tide of state-mandated laws make compliance even more confusing and, often, in conflict with federal regulations.

Here’s one example of this. Back in May, theMortgage Bankers Association asked its members to lobby against the passage of the Nevada Homeowners Bill of Rights (SB 321). They did this on the grounds that with the recent Consumer Finance Protection Bureau's  comprehensive, national mortgage servicing rules, any state-specific standards by the Nevada legislature would create uncertainty, add costs, and produce possible conflicts of law. Those seem like very sensible points, so of course, the association’s requests were ignored and the bill was unanimously approved.

Therein lies the problem with state regulation—it’s a political process. With legislators, governors, and state attorneys general being elected officials, it’s difficult for them to oppose laws and rules that aim to protect consumers (i.e., voters), despite potential conflicts with federal regulations.         

For instance, consider the various state rules governing the use of autodialers and recorded messages, which is already well covered by the TCPA. One area of state focus is calling hours. The TCPA allows telemarketers to call (when it allows them to at all) only between 8 a.m. and 9 p.m. customer local time. It places no time-of-day restrictions on customer service or collections calls, allowing companies like passenger airlines to determine for themselves if it is appropriate to automatically notify passengers booked on a 6 a.m. flight of a delay or cancellation.

But various states have also weighed in on this topic. Many prohibit any automated calls before 9 a.m., while others say you can’t call after 8 p.m. One state even cuts you off at 5 p.m. and others say “not on my holidays.” While some thoughtfully provide exemptions to these rules for communications with existing customers, others do not. Almost all the states warn of hefty fines for violations, while others simply threaten criminal prosecution.

Such conflicts are also found in the laws governing credit and collections practices. The Fair Debt Collection Practices Act is the federal law governing the practice of third-party collection agencies, debt buyers, and collection attorneys. Original creditors are exempt from these rules, although most choose to abide by the spirit if not the letter of the law. That’s not good enough for some states. Massachusetts, among other restrictions and requirements, places specific limits on creditors’ efforts to collect bills from their own customers, allowing no more than two attempts to contact a state resident about their past due account every seven days.

To avoid running off the straight and narrow path and into the ditch of noncompliance with these state rules, customer contact operations need to work with internal IT staff and technology vendors to configure guardrails on their CRM and communications systems to limit the time of day and inter-day frequency of contacts based on the borrower’s state of residence. It’s also important to be aware of the states that require registration of equipment such as automatic dialing and announcing devices (ADAD), as well as licensing requirements for telemarketers or collection agencies.

As difficult as compliance with these varied and occasionally conflicting laws may be, it’s critical. The risks of fines, court awards, or even worse compel a dedicated effort to stay informed on applicable regulations and work for reasonable and balanced rules going forward.Walking the tightrope between compliance and customer satisfaction is a challenge all Fortune 500 companies face every day. While there is no easy answer to managing proactive customer contact and compliance, a little education, the right guardrails, and an integrated view of regulations impacting our industry can go a long way.