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Appeals Court Reverses Decision, Allowing TCPA To Move Forward Because Daughter of Cardholder Not Bound By Agreement

The Court of Appeals for the Seventh Circuit has reversed a lower court ruling that had granted arbitration in a class-action case alleging violations of the Telephone Consumer Protection Act, after a creditor was sued by the underaged daughter of a cardholder for placing collection calls to the daughter’s cell phone.

A copy of the ruling in the case of A.D. v. Credit One Bank can be accessed here. The case has been remanded back to the lower court and ordered to continue.

The mother of the plaintiff had used the daughter’s cell phone to call the defendant, Credit One Bank. Credit One attached the daughter’s cell phone to the account and when the mother fell behind on her payments, the company started trying to contact her using the numbers in its system, including the daughter’s cell phone.

When the suit was initially filed, Credit One did not realize that it was the mother’s account that was the subject of the suit. When it finally clued in to who the actual cardholder was, Credit One sought to compel arbitration, according to the terms of the cardholder agreement that the mother signed.

Along with receiving calls placed to her cell phone, the only other evidence that the daughter used the mother’s credit card was one time when the mother pre-ordered smoothies for her and her daughter and sent the daughter — with the card — to pick them up. The daughter was 14 at the time.

The District Court ruled that the daughter was an “authorized user” and still bound by the arbitration clause in the agreement. The outcome of the lawsuit was stayed pending results of the arbitration.

The Appeals Court disagreed with the authorized user defense, saying that there is a specific procedure that must be followed to add an authorized user to an account and that procedure was not followed when the daughter went to pick up the smoothies. In fact, the cardholder agreement stated that an individual must be 15 to be eligible to be added as an authorized user.

Because the daughter is not subject to the cardholder agreement, the creditor needed to obtain consent in order to try and contact the mother on the daughter’s cell phone, the Appeals Court ruled.

 

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