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Financial Services Law Insights and Observations

Ninth Circuit: payday lenders not vicariously liable under TCPA for text messages

Privacy/Cyber Risk & Data Security Courts Ninth Circuit Appellate TCPA Payday Lending

Privacy, Cyber Risk & Data Security

On January 10, the U.S. Court of Appeals for the Ninth Circuit affirmed that three payday lenders and two marketing companies (together, the defendants) did not indirectly violate the Telephone Consumer Protection Act (TCPA) by accepting marketing help from a separate lead generator company that used a program to send text-messaged advertisements. In upholding the district court’s decision, the three judge panel concluded that “it is undisputed” that the defendants did not enter into a contract with the lead generator company, and further, that the lead generator company did not act as their agent or purported agent. The plaintiff-appellant that received the text-messaged advertisement—which directed consumers who clicked on the link within the message to a loan application website controlled by one of the defendants—filed a putative class action complaint, certified by the district court, against the defendants to allege that they were vicariously liable for sending the text messages in violation of the TCPA. Specifically, the plaintiff-appellant claimed the defendants ratified the lead generator company’s actions when they accepted leads even though they knew the leads were being generated through text messages. The district court granted summary judgments for all the defendants, and ruled they were not vicariously liable for the lead generator company’s actions, and that additionally, the plaintiff-appellant failed to present evidence that defendants had actual knowledge that the texts were being sent in violation of the TCPA. The appellate panel also noted that because one of the defendants—a contracted lead provider—had “no ‘knowledge of facts that would have led a reasonable person to investigate further,’ . . . [the defendant] cannot be deemed to have ratified [the] actions and therefore is not vicariously liable.”

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