For the Record

Published: June 26, 2007

Agencies that record telephone calls should implement a formal call recording policy.

The debt collection process really begins when a collector makes personal contact with a consumer in order to help resolve the consumer’s financial situation. The effectiveness of the collection process comes from the personal contact and connection made through a telephone conversation between the collector and consumer. Unfortunately, because telephone calls are one of the most commonly used avenues of communication in the collection process, they are also a common source of alleged state and federal law violations.

Because legal compliance is of utmost importance to collection agencies and technology services such as call recording are ubiquitous, many debt collectors adopt a policy of recording conversations with consumers in order to protect themselves. The benefits of such a policy are obvious. If a consumer files a complaint with a state or federal authority or files suit against the collector for violations of state and federal law, having a recording of the call provides an objective third-party analysis of the conversation’s content. Because sarcasm, tone and intent can be misinterpreted over the phone, and because the human memory is prone to inaccuracies, a recording may settle an issue before it becomes inflamed.

Recorded calls can also be used as part of a quality assurance program. Managers can listen to recorded telephone calls to make sure proper customer service is being provided and to ensure compliance with the law and company policy.

Despite the inherent benefits, collectors must take the necessary precautions before implementing a full call-recording policy. There are bodies of state and federal law that govern the ability to record phone conversations, and agencies must be aware of all applicable laws as they relate to a collector’s scope of operations. Though most state and federal laws were written within the context of employee monitoring, these laws are binding when recording collection calls—even if the intent is to preserve the calls in the event of litigation.

Federal Law

Congress passed the Electronic Communications Privacy Act (ECPA) in 1986 to protect the privacy interests of the general public. Under the ECPA, it’s illegal to intercept any wire, oral or electronic communications, including telephone conversations. Fortunately, the ECPA provides two applicable exceptions known as the “business extension exception” and “consent exception.”

The business extension exception allows an employer to record or intercept conversations for the purpose of monitoring compliance with company policy or federal, state or local laws. If an employer does intercept a phone conversation and it’s determined the subject of the intercepted communication is not relevant to the business purpose for which the call was intercepted, the contents of the communication must be disregarded. Federal appellate courts have stated that employers who wish to utilize the business extension exception may not monitor the personal calls of employees any longer than necessary to determine that the call is personal in nature because employers do not have a legitimate business interest in personal calls.

The consent exception allows communications to be intercepted if one party to the conversation consents to the recording. Provided employees are notified of the company’s call recording policy as a term of employment, the employee consents to the recording and the ECPA is satisfied. When implementing a company call recording policy, businesses may wish to follow the U.S. Chamber of Commerce’s guidelines to ensure effective consent:

* Notify employees they may be monitored.
* Give a written copy of the company’s policy to all employees and have them sign a form to acknowledge their understanding of the policy.
* Restrict monitoring to situations that serve a legitimate business purpose, such as training or compliance with the law. Electronic monitoring should never be used to harass, intimidate or oppress employees.
* If monitoring, do so randomly. If challenged, random monitoring is considered less intrusive to the employee than general, steady observation.

State Law

Unfortunately, federal law is not the only authority on telephone call monitoring. Many states have passed laws that have bearing on this issue. The initial intent of the many state laws varies, including employee monitoring, eavesdropping and wiretapping. Whatever the initial intent, these laws are all binding on the credit and collection industry.

For instance, Alabama law, which was intended to curtail eavesdropping, requires the consent of at least one party engaged in the communication. In contrast, Delaware requires the consent of both parties because the state believes it is a violation of privacy for people to have their conversations recorded without their knowledge.

When a state does require the consent of both parties in order to lawfully record a telephone conversation, consent may be achieved in a few ways. Most commonly, at the beginning of a phone call with a consumer, a debt collector will have a recording that notifies the consumer the call may be monitored or recorded. The alternative is to have the first live person the consumer speaks with give the consumer the warning at the initiation of the call. After receiving notice that the call may be monitored or recorded, by continuing to stay on the line and communicate with the debt collector, the consumer is giving her implied consent to the recording.

Debt collection is increasingly an interstate industry, and consequently, some question has developed regarding which state call recording laws apply to the conversation. Is it the law of the state in which the call originated? Is it the law of the state in which the call was received? Or is it the more restrictive of the two? This was the point of contention in a recent lawsuit decided by the Supreme Court of California. In Kearney v. Salomon Smith Barney Inc., an Atlanta-based financial institution called clients in California and recorded the telephone conversations without the consent of the California residents. Georgia permits the recording of a telephone conversation pursuant to the consent of one party, whereas California requires the consent of all parties in order to record the communication.

The California Supreme Court decided that when there are competing jurisdictional interests relevant to a dispute, the court must consider which jurisdiction’s interests would be more severely impaired if its laws were not applied to the issue at hand.

Every state has a legitimate interest in protecting the rights of its citizens, and the court concluded that California’s privacy interests would be more impaired if Georgia law was applied to the situation. Alternatively, residents of Georgia are not harmed in any way by applying California law because it actually affords Georgians a greater degree of protection than they enjoy under Georgia state law.

Beyond this case, there is very little guidance provided in case law or in federal and state law. A prudent debt collector intending to implement a policy of recording telephone conversations with consumers should consult legal counsel and conservatively apply relevant state law, paying close attention to the privacy interests of the consumers involved.

In addition to the consent of the parties, many states also impose other requirements on an entity that chooses to record telephone communications. For instance, in Delaware, content of all recorded conversations must be retained for a period of 10 years. In Georgia, any electronic monitoring equipment used solely for business improvement purposes must be licensed by the state. Illinois requires employers to post a sign within the workspace notifying employees that conversations may be recorded.

An Effective Tool

Many debt collectors have successfully defended themselves against legal allegations by producing the recordings of the telephone conversations that led to inquiry or lawsuit. Collectors should also be aware that consumers are increasingly embracing this technology and recording their conversations with debt collectors.

During the training process, employees in the debt collection industry must be made aware that conversations they have with consumers can and will be recorded by the debt collection agency and/or the consumer. A professional tone and demeanor must be maintained during all telephone conversations with consumers.

A policy of recording telephone conversations with consumers can be very beneficial for debt collectors. The ability to substantiate the content of a conversation with a consumer could help dismiss a Fair Debt Collection Practices Act lawsuit, and monitoring the actions of employees enables a collection agency to maintain the highest level of compliance and customer service. However, the benefit comes with a price. Any debt collector implementing a telephone call recording policy must follow all applicable state and federal laws. A written policy should be developed and all employees must be made aware of its provisions.