SCOTUS’ impact on the lending landscape
The Supreme Court’s June 20th decision in McLaughlin Chiropractic Associates, Inc. v. McKesson Corp. ruled that federal district courts no longer have to follow the Federal Communication Commission’s (FCC) interpretation of the Telephone Consumer Protection Act (TCPA). TCPA is a federal law that regulates how businesses can contact consumers by phone or text, requiring consent for certain communications and imposing strict penalties for violations.
This decision has the power to upend predictability in the way lenders do business and communicate with clients across state and district lines. Now, district courts have more authority to interpret and enforce these regulations, which can lead to increased legal challenges and an unpredictable patchwork of court interpretations. If lenders fail to comply, they risk facing significant fines that impact their license, and therefore the livelihood of their business.
Courts across the country now must revisit the fundamentals of TCPA’s guidance, including what qualifies as expressed written consent, how consent is revoked, and what communications fall under TCPA protections. Historically, lenders structured their communications strategies around a uniform set of guidelines, but McLaughlin v. McKesson has revoked this common-sense approach. For lenders with widespread operations, they face the burden of creating multiple communications processes for different jurisdictions or widely abiding by the strictest one.
A direct effect on lender operations
For an industry that has long relied on the FCC to provide a single, uniform set of rules, this shift creates a level of uncertainty lenders haven’t faced in decades. The removal of the FCC’s jurisdiction over how TCPA is interpreted and implemented strips multistate lenders of homogeneous client outreach and business operations. TCPA dictates how, when, and why lenders and servicers can contact existing or potential clients.
Without clear guidelines and a significant increase in litigation risk, the industry may be faced with an unlevel playing field and inconsistencies within the market, thus leading smaller, more risk averse lenders to materially change how they communicate with consumers and pursue business for fear of steep legal costs. For lenders whose operations are across districts or states, they face a difficult path forward to comply with differing rules across jurisdictions which may lead to a state-by-state approach as lenders may be forced to defer entirely to respective state law. and dodge hefty noncompliance fines.
If lenders fail to abide by the correct regulations in each area, they open themselves up to costly lawsuits and risk creating new complex legal precedence. In states with existing laws similar to TCPA regulations, the compliance structure is increasingly difficult to follow.
In addition, the industry has not seen technology pace the evolution of these Supreme Court decisions or the manner in which lenders and consumers look to communicate. Lenders rely heavily on third-party technology providers to have system controls in place to help mitigate the risk of non-compliance.
The Supreme Court ruling has upended the once reliable and established FCC interpretations, leaving potential gaps and increased risk in the space of third-party reliance and oversight.
Consequences posed to lenders and borrowers alike
The implications of this don’t only harm lenders, but the risks extend to current and prospective homebuyers as well. When unclear or inconsistent regulations force lenders to scale back communications, borrowers risk missing critical updates. Prospective homebuyers might not receive calls and understand the full extent of their homebuying options. Borrowers might miss their mortgage
payment simply because they couldn’t receive a reminder text.
While the extent of McLaughlin v. McKesson’s implications has yet to be seen, the possibilities underscore the need for transparent, standardized regulations across the industry.
Policymakers must recognize the threats posed by a fractured regulatory landscape for professionals and consumers alike. Until this happens, this ruling will continue to replace uniformity with unpredictability, harming borrowers and leaving lenders to jump through heightened hurdles to remain compliant.
Amanda Tucker is the Chief Risk and Compliance Officer of Atlantic Bay Mortgage Group.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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