Home / Compliance / Ninth Circuit Revives TCPA Vicarious Liability Suit Against Student Lender

Ninth Circuit Revives TCPA Vicarious Liability Suit Against Student Lender

The Court of Appeals for the Ninth Circuit on Friday overruled a lower court’s grant of summary judgment in favor of the defendant after it was accused of violating the Telephone Consumer Protection Act because debt collectors hired by a company it had placed the accounts with attempted to contact her using an automatic telephone dialing system without her consent.

A copy of the ruling in Henderson v. United Student Aid Funds, Inc., can be accessed by clicking here.

The case has been remanded back to the District Court for further proceedings.

USA Funds owned student loans taken out by the plaintiff and had hired Navient to service them. When the plaintiff stopped repaying the loans, Navient contracted with a number of different debt collectors to try and obtain payments on the unpaid debts. The plaintiff filed suit against USA Funds, Navient, and the collectors. The claims against the collectors and Navient were dismissed for lack of personal jurisdiction.

The plaintiff argued that the defendant was liable for the alleged TCPA violations of the companies that were hired to collect the plaintiff’s debts, and that the plaintiff was liable “under the federal common law agency principles of ratification and implied actual authority.”

The Ninth Circuit agreed with the plaintiff that the defendant had a “principal-agent” relationship with the collectors and that a court should hold it liable for the collectors’ TCPA violations.

In looking at declaratory rulings from the Federal Communications Commission that were issued in 2008 and 2013 as well as Gomez v. Campbell-Ewald Co., a plaintiff must show there is an “agency relationship between a defendant and a third-party caller for there to be vicarious liability for TCPA violations,” according to the Ninth Circuit’s ruling.

Because the defendant “had actual knowledge” of the allegedly unlawful practices — audit reports provided by Navient — committed by its agents — the debt collectors, which were calling on behalf of the plaintiff and accepting payments on behalf of the plaintiff — and did nothing to stop it, the defendant essentially consented to the behavior, according to the court.

USA Funds’ audit findings combined with its knowledge about common practices in the industry should have alerted USA Funds that it needed to investigate further. Instead, USA Funds continued to accept the benefits of the debt collectors’ violations and to remain silent about the collectors’ legal obligations under the TCPA.

Indeed, the record suggests that USA Funds’ set up the collection structure between itself, Navient, and the debt collectors to remain willfully ignorant and avoid liability. For example, USA Funds directions to Navient and the debt collectors were general and open-ended. USA Funds did not set performance or operational standards for Navient or the debt collectors. Nor did USA Funds or Navient have policies or procedures in place to ensure their debt collectors’ calling practices complied with the TCPA. USA Funds did not receive information about the debt collectors’ calling practices, and it did not monitor the debt collectors’ skip tracing activities. USA Funds forwarded all consumer complaints about the debt collectors to Navient, including alleged TCPA violations. Triable issues of fact exist, therefore, as to whether USA Funds ratified the debt collectors’ actions through willful ignorance.

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