Capital One Financial Corp. (“Capital One”) and three collection agencies have agreed to pay one of the largest settlement amounts in history — $75.5 million — to end a consolidated class action lawsuit alleging that the companies used an automated dialer to call customers’ cellphones without consent in violation of the twenty-two-year-old Telephone Consumer Protection Act (“TCPA”). Judge Holderman of the Northern District of Illinois preliminarily approved the settlement in late July. 

TCPA Allegations and the Proposed Settlement

In 2012, separate cases against each defendant were consolidated by the U.S. Panel on Multidistrict Litigation because the collection firms were collecting debts on behalf of Capital One. The allegations were largely the same:  that the companies used autodialers and/or pre-recorded messages in calls to cell phones without the consumers’ express consent.

Without admitting any wrongdoing, according to the settlement agreement, Capital One will pay $73 million into the settlement fund with the other three companies contributing approximately $2.5 million. According to estimates provided by class counsel in its July 14th court submission, the proposed agreement would provide between $20 and $40 to each member of the class, which is estimated to include about 21 million people, and is defined to include all people in the United States who received a call from Capital One’s dialers to a cellphone from an automatic telephone dialing system with an attempt to collect on a credit card debt from January 2008 to June 2014 and those who received calls from participating vendors from February 2009 to June 2014.

The TCPA provides redress for those who receive unsolicited telephone calls, texts or faxes, and includes statutory penalties of $500 per violation and $1,500 for willful violations. As such, commentators have noted what class counsel acknowledged to the court; i.e., the settlement fund “does not constitute the full measure of statutory damages potentially available to the class,” but counsel argued that this fact “should not weigh against preliminary approval.”

If the settlement is approved, up to 30 percent of the settlement amount (about $22.5 million) will be awarded to the consumers’ attorneys, and each of the five lead plaintiffs each will receive no more than $5,000.

In addition to any monetary award, the settlement identifies the “core relief” as changes to Capital One’s business practices, and notes that Capital One already has “developed and implemented significant enhancements to its calling systems designed to prevent the calling of a cellular telephone with an autodialer unless the recipient of the call has provided express consent.”

In seeking preliminary approval of the proposed settlement, plaintiffs’ attorneys noted that the parties remained sharply divided on many issues including “three critical ones.” The disagreements include the defenses that Capital One had raised, including: (i) whether the Capital One customer agreement provided the prior express consent to make automated calls to class members’ cell phones; (ii) whether the statute allows “prior express consent to be obtained after the transaction that resulted in the debt owed,” and (iii) whether the action could fairly be maintained as a class action given the predominance of individual issues.

It bears mentioning that the Capital One litigation was filed prior to the adoption of the October 2013 amendments to the regulations implementing the TCPA. Under the new rules now in effect, for profit-businesses have to acquire “prior express written consent” before making any type of call or sending any text message using autodialers or prerecorded voices to cellphones.

The Capital One settlement is subject to formal approval, including notification to the class. The final hearing on the settlement is set for December 9, 2014.