California Decision Regarding Call Recording Might Benefit Other Collectors

Junge Frau mit HandyState laws regarding recording of calls vary, but a recent decision by a Federal Judge in California may set a precedent that will benefit collectors in other states, as well. (See 8/11/14 article on InsideARM.)

California actually has two provisions that apply in their Invasion of Privacy Statute, California Penal Code Sections 632 and 632.7. A heavy fine of up to $2500 for the first offence and up to $10,000 can be imposed on those found in violation of either statute, plus potential jail or prison time if the statute is not strictly followed. Additionally, Penal Code section 637.2 provides that any person who has been injured by a violation of the Privacy Act may bring a civil action against each person who committed the violation, and may recover damages for each violation in an amount equal to the greater of $5,000 or three times the amount of the actual damages sustained by the injured person

Why calls are recorded

Collection agencies and law firms record calls for a variety of reasons. One is simply for training purposes. The collector and the supervisor can listen to the recording together and talk about how performance quality and results could be enhanced. Another reason is to have proof of what was said, in case there is a claim of a violation of the FDCPA or relevant state or local law, or a dispute over what was said by either party.

On the one hand, recording can reduce liability, but on the other hand, if state recording laws aren’t strictly adhered to, liability of a different sort kicks in. California’s recording statute, which requires a person to obtain consent from all parties to a call before recording, imposes civil liability of $5,000 for each call recorded without prior permission. This has led to not only individual claims, but also to class action suits that can possibly cost agencies millions of dollars.

Consent to record

Consent can be obtained by a recording disclosure at the outset of the call. All of us have heard such messages when calling or being called by many types of businesses. “For training or for record keeping purposes, this call may be recorded.” Some states only require that one party knows the call is being recorded. That type of law lets the agency off the hook. However, many companies fail to make proper call-recording disclosures. A recent decision in California could put a stop to some lawsuits, and could possibly serve as a precedent in related cases in other states.

California Law

In California, improper call recording has focused on two provisions of their Invasion of Privacy Statute: Penal Code Sections 632 and 632.7. The InsideARM article states, “Section 632 prohibits a person from eavesdropping upon or recording a ‘confidential communication’ without the consent of all parties to the communication. Section 632.7 regulates communications involving a wireless telephone, such as a cell phone, and imposes liability on a person who ‘intercepts or receives and intentionally records’ a communication without the consent of all parties to the communication. Significantly, Section 632.7 does not require the recorded communication to be confidential before liability may be imposed.”

More evidence is required to recover damages under Penal Code Section 632. Each case must be considered individually, based on whether or not the call contained ‘confidential communication.’ That makes it more difficult to file and uniformly resolve class-wide suits. Under Penal Code Section 632.7, agencies argued that only third parties who ‘intercept’ or ‘receive’ a wireless call, and proceed to intentionally record it without the participants’ knowledge are regulated, and the content of the call need not be considered. Nevertheless, judicial decisions have consistently rejected this defense, stating that 632.7 applies to all call participants because each ‘receives’ a communication from the other party during the call. Thus, the many unfavorable rulings exposed agencies to class action suits when they recorded calls to cell phones.

The Young v. Hilton Worldwide, Inc. Decision

A federal judge in CA recently reconsidered the applicability of Section 632.7 to call participants in Rick Young’s class action suit against Hilton Reservations Worldwide, filed for allegedly recording his call to Hilton’s customer service representative. Hilton moved to dismiss the complaint and the district court granted Hilton’s motion on the basis that Young failed to prove that the calls to Hilton were “confidential.” Young appealed. Only his Section 632.7 claim survived the appeal.

On remand, the Judge Manual L. Real dismissed the claims made under penal Code Section 632.7.

“The apparent purpose of § 632.7 supports limiting its reach to third parties who unintentionally receive the communication. The advent of cellular technology introduced a risk that did not exist with respect to landlines: that third persons, not parties to the communication, would be able to obtain access to the communication. It was entirely reasonable for the California legislature to address this risk by enacting legislation that prohibited the recording of a conversation overheard, intentionally or inadvertently, by a third person. Here, Hilton was not a third person; it was an intended party to the communication initiated by Young and members of the purported class.”

“Further to any extent that Hilton received such calls, it had the consent from the caller. Moreover, the legislature did not limit the service observing monitoring of calls that it is alleged in this case. See Shin v. Digi-Key Corporation, 2012 WL 5503847 (C.D. Cal. September 17, 2012). The context of the statutory scheme along with legislative history make it clear that Section 632.7 does not reach Hilton’s alleged activity. Hilton is not alleged to have received or intercepted a radio transmission. Hilton had permission to receive the phone calls and service observing recordings are exempted.”

The court also further determined that “It would appear odd, and perhaps unconstitutional, to criminalize conduct on the basis of the type of telephone a caller chooses to use.” The court held that the intent of 632.7 applies only when a third party and not the intended party intercepts or receives and records a communication. Interpreted that way, “only persons who record a communication after intercepting or inadvertently receiving it commit an invasion of privacy.”

Wishful thinking?

The authors of the InsideARM article conclude, “The Hilton decision marks a significant victory for the collection industry. The ruling provides agencies, creditors, and other companies in the collection industry with a valuable tool for combatting high-cost litigation under California’s unforgiving Invasion of Privacy Statute. Hopefully, other courts will continue to swing the pendulum in the other direction by adopting Hilton’s sound reasoning in future cases.” It sounds like a possible “ripple effect” worth watching.

The National List of Attorneys would like to thank Harvey M. Moore, Esq., President of The Moore Law Group in Santa Ana, CA, for contributing his legal expertise and significant content to this blog. 

Marti Lythgoe, NL Editor


Categories: Business Relationships, Compliance, Debt Collection

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