Debt to FCC Can Have Serious Ramifications

Posted on January 29th, 2015 by

From time to time, we write about the FCC assessing monetary forfeitures (fines) against broadcast licensees for violating FCC rules or policies. Some pay those fines; others wait until the FCC asks the Department of Justice to actually begin an action to collect the fine.

Licensees can also become indebted to the FCC via other means, such as forgetting to pay annual regulatory fees, or paying too little. There, a 25% penalty plus interest begins to run from day one.

The fact that a licensee owes the FCC is one thing. But in the meantime, the FCC has the power to do things that make a licensee’s life difficult. For example, they can “red light” a licensee. The red light reference really does mean “stop” because the FCC stops processing any application you might file until the amount in arrears is paid up. In some cases, the online system can even prevent a licensee from submitting a filing in the first place.

Two recent examples are illustrative. In one, the FCC mistakenly assessed a regulatory fee to a prior licensee for a broadcast station that had been sold. The new licensee was exempt from regulatory fees, so the FCC should not have assessed a fee for the station at all. Yet the “overdue” regulatory fee, with penalties, had already been sent to a collection agency, and they were aggressively pursuing the station for the “debt” owed. An email to the FCC’s Revenue and Receivables Department explaining the mistake luckily averted any further action, and the collection agency was instructed to stand down. But in the meantime, the prior licensee had been red lighted, meaning that any other licenses it held were affected. All based on a mistake.

In the other, the FCC considered a licensee’s request that it reconsider a $5,000 fine resulting from a seven-month failure to seek temporary silent authority from the FCC. The FCC found no reason to change its mind, ending its decision with “we will withhold grant of the renewal application until Licensee has completed payment of the forfeiture.” For some, a delayed renewal might not be a big issue given that continued operation is permissible. But a non-renewal might trigger defaults in a broadcaster’s loan, for example, or cause potential buyers to lose interest if the station were being marketed.

The FCC normally has significant power over licensees anyway. But when a debt to the FCC enters the picture, that power is multiplied and potentially significant ramifications follow. Tread carefully.