Agency Believes Proposed Changes Would Combat Telephone Bill Cramming and Other Fraudulent Practices in Pay-Per-Call Industry
A proposal approved by the Federal Trade Commission to revise its 900-Number Rule includes recommendations that will combat telephone bill cramming -- unauthorized charges on consumers' phone bills.
"After the Commission adopted the 900-Number Rule in 1993, consumer abuses in the 900-number industry almost disappeared. Since then, we have seen the emergence of cramming and other abuses in telephone-based information or entertainment services offered through dialing patterns other than 900 numbers," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "The proposed amendments to the 900-Number Rule announced today are designed to stop these new abuses in their tracks."
Despite the success of the Rule in correcting the abuses in the 900-Number industry, complaints about other types of audiotext services (accessed via dialing patterns other than 900 numbers) and complaints about cramming have risen sharply in recent years. The majority of complaints about audiotext services received by phone companies, consumer groups, and the Commission and other law enforcement agencies now involve 800 numbers, international numbers, or other dialing patterns that do not use the 900-number prefix. Many consumer and law enforcement agencies also have been inundated with complaints from consumers about cramming -- unexplained monthly, recurring charges on their telephone bills for services that were never authorized, ordered, received, or used.
Today's proposal is the result of extensive analysis by the Commission of the effectiveness of the Rule and developments in the marketplace since 1993. In addition to reviewing written comments received in response to an earlier Federal Register Notice about the Rule, the FTC convened a two day public workshop attended by consumer representatives, industry members and other interested stakeholders. The proposed revisions are based in part on the 1996 Telecommunications Act, which granted the FTC authority to broaden the scope of the 900-Number Rule to encompass audiotext services that may be accessed through dialing patterns other than the 900 exchange.
The agency's original 900-Number Rule requires disclosures about the cost of telephone-based entertainment or information services -- known as "audiotext" services -- that consumers access by dialing a 900 number. These disclosures must be made in the advertising of any 900-number audiotext service, and also in a free "preamble" message included at the beginning of any audiotext program. The original Rule also prohibits advertising of 900-number services to children under the age of 12, requires special disclosures to callers who may be under the age of 18, and requires disclosures for services that promote sweepstakes or that provide information on a federal program that is not operated by the government. The original Rule also established procedures to enable consumers to dispute charges for billing errors relating to audiotext services. The Telephone Disclosure and Dispute Resolution Act, under which the original Rule was adopted, mandates that 900-number blocking be made available, so that consumers can exercise meaningful control over access to 900-number services from their telephones. The proposed revisions to the Rule take a three-fold approach to the problem of cramming:
1. The proposed Rule would require the express authorization of the person to be billed for the purchase of any "telephone-billed purchases" that cannot be blocked by 900-number blocking.
2. The proposed Rule would prohibit vendors from billing consumers for monthly or other recurring charges for pay-per-call services unless the vendor had entered into a "presubscription agreement" with the person to be billed for the service and had sent the consumer a written copy of that agreement. Thus, a single call to a pay-per-call service could no longer result in a consumer being unwittingly enrolled in a "psychic club" or other service plan which would result in recurring fees.
3. Consumers would have legal recourse to dispute unauthorized charges "crammed" on to their phone bills and have these charges removed. Some "crammed" charges result from the placement of a telephone call, which enables a vendor to "capture" a consumer's phone number as a basis for billing. Other crammed charges result from the unscrupulous provider having obtained a phone number through some other means, such as a sweepstakes entry. The proposed Rule would provide dispute resolution protections for all telephone-billed purchases, even if the charges for such purchases did not result from a telephone call. These dispute resolution procedures would not apply to toll charges.
In addition, the proposed revisions to the Rule, which are available on the FTC's website, would:
- Expand coverage of the Rule to ensure its protections apply to the offer and sale of every audiotext service, even if the service was not accessed via a 900 number.
- Keep calls to toll-free numbers free. The proposed Rule would require an audiotext provider, before permitting access to a service accessed by calling a toll-free number, to have a contractual agreement with the party responsible for paying for the service and provide a consumer with a "personal identification number" ("PIN") to prevent unauthorized access to the service.
- Fight cramming by imposing liability on vendors, billing entities and service bureaus, including billing aggregators, when they "know or should have known" that a telephone-billed purchase has not been expressly authorized by the person responsible for paying the bill.
- Enhance a consumer's right to dispute unlawful charges by ensuring that any time a consumer disputes a charge for a telephone-billed purchase, the consumer will not be required to pay that charge until he or she is provided with both documentary evidence of the validity of the charge and a written explanation describing why the charge is valid.
- Prevent vendors, service bureaus, and providing carriers from using deceptive tactics in attempting to sustain an illegitimate charge for a telephone-billed purchase. For example, this would prohibit a vendor from falsely representing to a billing entity that a consumer called a 900 number when, in fact, the consumer called a toll-free number.
- Require disclosure of cost and other material information in any facsimile-transmitted solicitation to call a pay-per-call service, or in any such solicitation transmitted to a consumer's pager, beeper, or similar device.
The Commission vote to publish the proposed revisions in the Federal Register for public comment was 4-0.
An announcement regarding the proposed revisions to the 900-Number Rule will be published in the Federal Register shortly. Written comments will be accepted until January 8, 1999. Notification of interest in participating in the public workshop also must be submitted on or before January 8, 1999. The public workshop will be held at the Federal Trade Commission on February 25 and 26, 1999, from 9 a.m. until 5 p.m. Six paper copies of each written comment should be submitted to Office of the Secretary, Federal Trade Commission, Room 159, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
Copies of the full text of the Commission's proposal and information about how to submit comments on the proposal are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. R611016)
Office of Public Affairs
Bureau of Consumer Protection