Two Recent Court Decisions of Importance to Banks and CUs

Last week, two federal courts issued decisions of importance to financial institutions.

On March 16, a federal appellate court set aside some of the Federal Communications Commission’s constraints on when and how businesses can contact customers by phone. The FCC’s expansive interpretations under the Telephone Consumer Protection Act had created compliance challenges for financial institutions seeking to contact their customers with important account information.

The three-judge panel of the D.C. Circuit Court of Appeals ruled that the FCC’s definition of an autodialer was “unreasonably expansive,” since it would appear to cover ordinary smartphones, not just equipment designed to make robocalls. The court also vacated the FCC’s policy on calls made to numbers belonging to people who had consented to receive calls but that had since been reassigned to non-consenting persons; the court said that the FCC’s safe harbor (which allowed only one call before incurring liability) was arbitrary and capricious. The court upheld the FCC’s approach to handling how call recipients can revoke previously granted consent to calls but concluded that a caller and call recipient may contractually agree to specific revocation mechanisms.

On March 15, the Fifth Circuit Court of Appeals vacated the Department of Labor's fiduciary rule. The rule would have imposed a fiduciary standard of care on broker-dealers and investment advisers that provide investment advice to retirement plan investors. The court found that the rule's new definition of fiduciary conflicted with the Employee Retirement Income Security Act. The court also found that the rule did not meet the reasonableness tests under so-called Chevron deference.