Consumer Federation of California

Hearing Tuesday on AB 925, Allowing Debt Collectors, Subprime Lenders, Others To Record Calls With Consumers Without Notice Or Consent

Contact: Richard Holober / Brian Taylor

SACRAMENTO – Two dozen consumer, privacy, senior, student, labor and immigrant advocacy groups urge the defeat of Assembly Bill 925 (Evan Low, D-Campbell), which would eliminate a longstanding prohibition against businesses secretly recording cell phone calls with customers. The Assembly Committee on Public Safety hears the bill at 9 a.m. today (May 5).

AB 925 opponents include Consumer Federation of California, Privacy Rights Clearinghouse, Consumers Union, Consumer Watchdog, Electronic Frontier Foundation, Consumer  Action, Older Women’s League, Senior Financial Protection Network, California Alliance for Retired Americans, California Nurses Association, California Federation of Teachers, and 13 other groups. Link to No on AB 925 group letter. Big business and high-tech corporations, including trade association lobbyists for AT&T, Verizon and Comcast, back AB 925.

AB 925 would eviscerate a criminal law that for 22 years has required notice and consent by both parties to the recording of cell phone or cordless phone conversations. Virtually all businesses that record phone calls provide this notice with a simple pre-recorded statement that the call “may be recorded” at the beginning of a consumer phone call. A consumer who has been informed may terminate the call, or consent by continuing the call. California and ten other states have “two-party consent” laws.

“A secret recording is an ace up the sleeve of a corporation that it plays only when it is to its advantage should a consumer later complain about a price, payment terms, a faulty product, or bad service. But if the clandestine recording proves the customer’s complaint is valid, the business can destroy or conceal the recording. AB 925 tilts the playing field. It’s not fair to consumers,” stated Richard Holober, Executive Director of the Consumer Federation of California (CFC). CFC’s analysis of AB 925 cites examples of secret business recordings of phone calls with consumers, as well as polls that measure strong consumer concern about corporate invasion of personal privacy, and consumer discomfort at receiving phone calls from businesses.

In upholding California’s prohibition on secret recording of cell phone calls the state Supreme Court opined, “companies may utilize such undisclosed recording to further their economic interests – perhaps in selectively disclosing recordings when disclosure serves the company’s interest, but not volunteering the recordings’ existence (or quickly destroying them) when they would be detrimental to the company.” Kearney v. Salomon Smith Barney (2006) 39 Cal. 4th 95.

The Supreme Court pointed out that in codifying Section 632.7 (AB 2465 of 1991) and in subsequent laws, the state Legislature “repeatedly has enacted new legislation in related areas in an effort to increase the protection of California consumers’ privacy in the face of a perceived escalation in the impingement upon privacy interests caused by various business practices.” Kearney v. Salomon Smith Barney, Inc., (2006) 39 Cal. 4th at 124-25.

Advances in technology since this legislation was enacted have only made these corporate invasions of consumer privacy more pervasive, heightening consumer privacy concerns.

A 2014 Pew Research Center poll found that 91% of Americans agreed that consumers had lost control of how personal information is collected and used by corporations. 81% of respondents agreed that the content of phone calls was very sensitive or somewhat sensitive.

Companies that have been brought to justice under California law for violating the two-party consent law and making secret phone recordings include debt collectors, a foreclosure business, a loan company, credit card issuers, a loan servicer, health care providers, Las Vegas casinos, a security alarm company, and an airline. Some cases involved businesses secretly recording calls and harassing, badgering, or asking invasive questions of consumers, or selectively using clandestinely recorded information as a trump card in a subsequent consumer dispute.

In one case, pre-trial discovery revealed that the rate at which consumers terminated calls (“abandonment rate”) doubled when the company announced that the call would be recorded. While this case settled without a determination regarding the intentionality of the company’s decision to not announce that calls were recorded, it is not an unreasonable conclusion that the company analyzed the differential abandonment rate and made a business decision to withhold this important consumer disclosure in order to increase its success in completing consumer purchases by phone.

In another case, a patient sued a large health care provider after learning that the corporation had secretly recorded his private discussion regarding his erectile dysfunction as well as vast numbers of calls with other California patients.

Hearing an announcement that a call “may be recorded” can influence the consumer’s demeanor during the call. A consumer who is informed that a call is recorded may be more circumspect in expressing frustration with unfair treatment by a business. Knowledge of a recording may also influence the consumer’s willingness to be forthcoming with sensitive information, including providing credit card numbers and security codes, Social Security numbers, bank account information, medical conditions, prescriptions, personal attitudes, lifestyles, sexual preference, purchasing history and interests, and many other sensitive items. A consumer is entitled to know whether a call may be recorded before divulging any information.

The Assembly Committee on Public Safety is expected to vote on AB 925 at the May 5 hearing.

###

Since 1960, the nonprofit Consumer Federation of California has been a powerful voice for consumer rights.