Pay-Per-Call Rule Review: Response to Notice of Proposed Rulemaking: 16 C.F.R. Part 308, FTC File No. R611016 #29

Submission Number:
29
Organization:
Teleservices Industry Association
Initiative Name:
Pay-Per-Call Rule Review: Response to Notice of Proposed Rulemaking: 16 C.F.R. Part 308, FTC File No. R611016
Matter Number:

R611016

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of
Proposed Amendment to the Commission's 900-Number Rule

FTC File No. R611016

COMMENTS OF
THE TELESERVICES INDUSTRY ASSOCIATION
ON THE COMMISSION'S PROPOSED AMENDMENTS TO
THE 900-NUMBER RULE

Lewis Rose
D. Reed Freeman, Jr.
ARENT FOX KINTNER PLOTKIN & KAHN, PLLC
1050 Connecticut Avenue
Washington, D.C. 20036
202/857-6012

Dated: March 10, 1999

The Teleservices Industry Association ("TSIA") files these comments pursuant to Section I of the Federal Trade Commission's ("Commission") Notice of Proposed Rulemaking ("NPRM"), 63 Fed. Reg. 58,524 et seq. (Oct. 30, 1998), regarding the Trade Regulation Rule Pursuant to the Telephone Disclosure and Dispute Resolution Act (the "900-Number Rule"), 16 C.F.R. Part 308 et seq. (1999).

TSIA is a national trade association representing U.S. and international companies engaged in the information and electronic commerce industries. TSIA has been an active participant in all legislative and regulatory proceedings concerning pay-per-call information service proceedings since its formation. TSIA representatives have met on numerous occasions with the Federal Communications Commission, the Federal Trade Commission, the Department of Commerce, and various Members of Congress in a proactive effort to address the issues affecting the information services industry. By separate notice filed today, TSIA also requests an opportunity to participate in the hearing scheduled for May 20-21, 1999, to discuss the comments filed in this proceeding.

I. SUMMARY OF RECOMMENDATIONS

TSIA's comments focus on six aspects of the Commission's proposed changes to the 900-Number Rule, each of which is important to the continuing viability of the audiotext industry.(1) These comments highlight areas where the Commission's proposed changes to the 900-Number Rule (the "Proposal") will have a substantial adverse impact on providers of audiotext service as well as service bureaus, and offer alternatives which accomplish the Commission's consumer protection objectives without jeopardizing the industry's future.(2)

A. The Commission Should Allow Consumers to Use Credit, Prepaid, Debit, Check, Charge and Calling Cards, and Apply the Billing and Dispute Resolution Procedures for 900-Number Calls to All Such Transactions.

The Proposal expressly rejects allowing consumers to form presubscription agreements using debit cards (also known in the industry as "check" cards)(3) or calling cards. See 63 Fed. Reg at 58,538. According to the NPRM, "[t]o allow a calling card, debit card, or other means not within the ambit of both [the Truth in Lending Act ("TILA") and the Fair Credit Billing Act ("FCBA"), 15 U.S.C. § 1601 et seq.] to substitute for an actual agreement with the person to be billed for the service would undermine the entire purpose of the presubscription agreement exception to the Rule. It would also undermine the Commission's mandate to promulgate rules substantially similar to TILA and FCBA." See id.

The Commission's rejection of prepaid, debit, check and calling cards to pay for audiotext services poses a substantial threat to the viability of the audiotext industry. In just the last few years, in response to heavy marketing by credit card companies such as Visa and MasterCard, consumers have embraced debit and check cards as a means of engaging in commercial transactions.

Under the current state of technology, the Commission's express rejection of debit and check cards will effectively operate as a ban on the provision of audiotext services via toll-free numbers and paid for by credit or charge cards. Industry members are simply unable to tell whether a card number given by a consumer over the telephone is a credit card, or a check or debit card. In order to avoid violating the Rule, service bureaus offering audiotext services via 800 or other numbers advertised or widely understood to be toll free would be forced to discontinue not only all debit card transactions, but all credit card transactions as well.

The Telephone Disclosure and Dispute Resolution Act of 1992, Pub. L. 102-556, 106 Stat. 4181 (1992); Pub. L. 104-104, 110 Stat. 56 (1996) ("TDDRA"), does not mandate that the Commission reject prepaid, debit, check and calling cards simply because they are not automatically subject to the billing and dispute resolution procedures of TILA and FCBA. Instead, as the Commission has recognized in proposing dispute resolution procedures for audiotext services provided via 900-numbers, TDDRA only requires that consumers have dispute resolution procedures "substantially similar" to those enjoyed by credit and charge card users. See 63 Fed. Reg. at 58,551 ("TDDRA requires that the Commission impose requirements that are substantially similar to the requirements imposed under TILA and FCBA with respect to the resolution of credit disputes"). Moreover, the Telecommunications Act of 1996 expressly authorizes consumers to use these payment options. See 47 U.S.C. § 228(c)(7)-(9).

TSIA's members support the Commission's goal of ensuring that all consumers of audiotext services have ample means to protect themselves against fraudulent billing practices. Rather than reject an entire category of transactions, however, TSIA respectfully requests that the Commission simply allow consumers to use prepaid, debit, check or calling cards, and subject those transactions by rule to the billing and dispute resolution procedures which govern 900-number calls.

B. Presubscription Agreements and PINs:

1. The Proposal's Requirement that Disclosures Be Received By Consumers is Overbroad to Accomplish the Commission's Objectives.

The Proposal requires that consumers actually receive a unique personal identification number ("PIN"), together with written disclosures of all material terms and conditions associated with the presubscription agreement, including the service provider's name and address, a business telephone number that the consumer may use to obtain additional information or register a complaint, and the rates for the service, before the consumer can receive the service. See Proposed Section 308.2(i), 63 Fed. Reg. at 58,537-38 (proposing that "in every instance, "an actual contractual agreement with the person to be billed for the service must be reached in advance of the provision of the service") (emphasis added).

TSIA agrees with the Commission that consumers should not incur liability for purchases of audiotext services until after they have received the appropriate disclosures. However, the Commission's Proposal is simply too burdensome, both for consumers and for service providers. The Commission would have the service provider: (a) verify that the consumer is in fact the line subscriber ("[t]he presubscription agreement is never valid . . . unless it is reached with the person who will be billed for the service," 63 Fed. Reg. at 58,538); (b) provide the disclosures and a PIN in writing; (c) await a second call from the consumer; and then (d) bill the consumer for the service.

In order to streamline the process whereby service providers may provide, and consumers may receive, audiotext services via a presubscription agreement, TSIA proposes that consumers be given the disclosures listed above, as well as a PIN, orally during the first call to the service. If the service provider so chooses, it would then be entitled to provide the service during that same call. However, each such service provider would be obliged to assume the risk of providing an automatic credit to each consumer who claimed a billing error arising out of services accessed during the first call. In any event, the service provider would then send the disclosures and a PIN, just as the Commission now proposes, to each consumer who desires to enter into a presubscription agreement. All billing errors resulting from calls placed after consumers receive their written disclosures and a PIN would be subject to the same billing and dispute resolution procedures to which consumers of 900-number services would be entitled.

2. The Commission Should Narrow Service Provider Liability for Unauthorized Use of PINs.

The Commission should also narrow service provider liability for unauthorized use of PINs. As currently written, the Proposal's language that "[t]he service provider will be responsible for ensuring that the PIN is not distributed to anyone other than the person to be billed for the services under the presubscription agreement," 63 Fed. Reg. at 58,537, could be read to hold service providers strictly liable not only for initially sending the PIN to the person to be billed, but also for all unauthorized use of PINs. In other words, TSIA believes that its members should have no liability for unauthorized use of credit, charge, prepaid, debit, check and calling cards where they have had no role whatsoever in the theft or loss resulting in the unauthorized use. Service providers should not be liable where they neither know nor have reason to know that a consumer is using a PIN without authorization. While such a result may not be intended, TSIA is concerned that the vague language could be broadly interpreted in the future.

3. The Commission Should Clarify that PINs Need Only Be Unique to the Service Provider.

The Commission's proposal also provides that the PIN must be "unique to the individual," so that "the provider cannot issue the same PIN to more than one person." See Proposed Section 308.2(i), 63 Fed. Reg. at 58,536.

TSIA requests that the Commission clarify that each consumer need not be assigned a unique PIN, as long as the consumer, when using the PIN, appears unique to the service provider. TSIA recognizes that consumers are protected and that business prospers when unauthorized access to the service is prevented. However, the Commission's proposal that each consumer be given a unique PIN as a means of accomplishing that goal is likely to suppress caller activity for the simple reason that customers of large audiotext services will have difficulty remembering their PINs. The Proposal's mandate that each customer be given a unique PIN reduces the number of consumers who can choose their own PINs. Moreover, customers of large audiotext service providers could easily have PINs of five or even six digits, rather than the 4-digit PINs they use in connection with their credit and ATM cards. TSIA respectfully requests that the Commission simply require that each consumer, when accessing the audiotext service using a PIN, appear to the service provider to be unique, whether by matching a PIN against the ANI from which the consumer is calling, or otherwise.

C. The Dispute Resolution Process:

1. The Commission Should Amend the Proposed Dispute Resolution Procedures that Go Beyond Regulation Z.

While the Commission on the one hand relies on TDDRA's mandate that billing and dispute resolutions be "substantially similar" to those of TILA and FCBA to reject debit, check and calling cards, it proposes billing and dispute resolution procedures for 900-number audiotext services that differ from Regulation Z in at least four important ways. These are:

(1) Billing entities and service providers are required to provide a detailed response to billing error notices, and are subject to a mandatory document production requirement, while Regulation Z allows a less detailed response and for the production of documents only if the consumer asks for them. Compare 12 C.F.R. § 226(f)(1)-(2) with Proposed Section 308.20(c)(2)(ii), 63 Fed. Reg. at 58,565.
 
(2) The Proposal requires that billing entities and service providers provide notice that further collection efforts may occur, while Regulation Z has no analogous provision. See Proposed Section 308.20(c)(2)(i), 63 Fed. Reg. at 58,565.
 
(3) The Proposal far exceeds Regulation Z by allowing the consumer's declaration to rebut the billing entity's findings, including its call transport records, which are prepared and maintained in the ordinary course of business, by simply signing a declaration denying all knowledge of the call. Proposed Section 308.20(c)(2)(ii) n.4, 63 Fed. Reg. at 58,565, n. 4. There is no analogous provision in Regulation Z.
 
(4) The Proposal exceeds Regulation Z by providing that failure to abide by the dispute resolution process will result in the billing entity or service provider having forfeited its right to collect the disputed amount. Proposed Section 308.20(i), 63 Fed. Reg. at 58,566. Regulation Z contains no analogous provision.

In order to maintain consistency with its stated goal of providing billing and dispute resolution procedures "substantially similar" to those under TILA and FCBA, the Commission must either delete or amend each of the above-listed procedures.

2. The Commission Should Not Permit Frequent Users of Audiotext Services to Submit a Declaration Which Would Trump Service Providers' Business Records.

Footnote 3 of the current Rule allows for a rebuttable presumption that the services were actually delivered if a vendor can produce documents created and maintained in the ordinary course of business, such as call transport records, showing the date on, and the place to, which the goods or services were transmitted or delivered. See 16 C.F.R. § 308.7(d)(2)(ii), n.3. The Proposal would modify this by allowing consumers to rebut the presumption with a declaration signed under the penalty of perjury. See Proposed Rule at § 308.20(c)(2)(ii), n.4.

While the NPRM states that the declaration may trump ANI-based records, such as call transport records, it is not clear exactly when the declaration would be inadequate to rebut a presumption that the services were in fact delivered, short of the service provider possessing a signature or a tape recording. See 63 Fed. Reg. at 58,553.

TSIA agrees with the Commission that it is important for consumers to have procedural safeguards against unscrupulous billing practices. By the same token, however, the Commission must recognize that some consumers of audiotext services are unscrupulous, and its final Rule must balance the need for consumer protection for innocent victims of billing fraud with the reality of service theft by sophisticated purchasers of audiotext services.

TSIA urges the Commission to rethink its proposal that consumers be permitted to rebut call transport records, which are created and maintained in the ordinary course of business, with a simple declaration denying all knowledge of the call. Modern communications technology could, and likely would, turn this well-intended consumer protection device into the industry's hemlock, as World Wide Web sites dedicated to teaching consumers how to obtain free service proliferate. Moreover, Regulation Z does not provide that consumers may escape their liability for credit and charge card purchases by simply signing a sworn declaration denying all knowledge of the transaction. Because this provision will have such a substantial effect on the collection of legitimate charges, it alone renders the entire Proposal far from "substantially similar" to TILA and FCBA. Of course, this contravenes the will of Congress, as expressed in Title III of TDDRA. Accordingly, the Proposal's provision allowing consumers to trump business records with a consumer declaration must not be included in the final Rule.

If the Commission nevertheless insists on allowing consumers to shed their obligations by merely submitting a declaration denying all knowledge of the transaction, TSIA requests that the Commission limit that privilege to consumers who have not previously accessed audiotext services. Previous audiotext customers would have received the required billing error notices, and would be well aware of the protections afforded them under the Rule.

TSIA's alternative proposal (i.e., restricting the declaration to unsophisticated purchasers of audiotext services) would accomplish several laudable objectives. First, it would encourage the industry to develop and maintain a database of dissatisfied consumers, whom each service provider may or may not choose to block. This will certainly reduce the volume of consumer complaints. Second, it will allow the market to determine whether to provide services during the first call. Service providers will only allow such access if they determine that, notwithstanding the obligation to provide mandatory credits to consumers who file a notice of billing error, they can still profitably provide audiotext services without inordinate delay.

3. The Commission Should Clarify Under What Circumstances Declarations Filed by Customers Entitled To Do So Would Trump Service Providers' Business Records.

TSIA respectfully requests that the Commission provide some guidance as to the circumstances under which service providers' business records will trump the consumer declaration. To that end, TSIA proposes adding language in a footnote stating that whether a consumer's declaration will successfully rebut the presumption that goods and services were actually transmitted or delivered will generally depend on the facts of each case, including whether the consumer has provided supporting documents reasonably available to the consumer, such as a police report in the event of an alleged theft of service during a break-in, airline or other travel tickets and/or hotel receipts in the event the consumer alleges he was out of town when the calls were made, a birth certificate in the event the consumer alleges that the calls were made by a minor or a corroborating letter or other document from the consumer's LEC in the event the consumer alleges that the billing error is the result of crossed wires, together with the declaration.

4. Non-Blockable Telephone-Billed Purchases: The Commission Should Make Clear Under What Circumstances a Taped Authorization Will Qualify as "Express Authorization."

The Commission should also classify the circumstances under which a taped authorization satisfies the "express authorization" requirement. The Proposal would require service providers to possess "express authorization" by the billed consumer before billing for the calls. See Proposed Section 308.17, 63 Fed. Reg. at 58,564. While the Proposal states that "[f]or example, a tape recording of the person to be billed for the service being informed of the material terms of the agreement and then agreeing to make the purchase on those terms and pay the charges, would constitute evidence of express authorization," see 63 Fed. Reg. at 58,549, it is unclear whether and, if so, under what circumstances this "evidence" would be dispositive.

To remedy this deficiency, TSIA proposes adding language in another footnote providing that where service providers obtain tape-recorded (including digitally-recorded) verification proving that consumers received all material terms of the agreement, agreed to make the purchase on those terms and pay the charges, and confirmed that they are the responsible party for the telephone number to which the purchase will be billed, this tape recording (or digital recording) would be dispositive proof of "express authorization," as required by Proposed Section 308.17.

D. The Commission Should Expressly Allow Check Debiting.

Neither the current version of the 900-Number Rule nor the Commission's Proposal expressly allow check debiting as a method of payment for audiotext services provided via 800-numbers. Because check debiting is an efficient and instant method of receiving and making payment for services, it is very attractive -- both to the industry and to consumers.

The Commission has already approved check debiting in the context of telemarketing transactions generally. See 16 C.F.R. § 310(a)(3). Moreover, the Commission has expressly approved of check debiting in a consent agreement with an audiotext provider. See FTC v. Interactive Audiotext Svc., No. CV 98-3049 CBM (Dec. 16, 1998). Accordingly, the TSIA asks that the Commission simply codify its policy of allowing check debiting as a means of payment for audiotext services.

E. The Commission Should Withdraw its Proposal to Require that Calls Be Rounded to the Nearest Increment.

TSIA urges the Commission to reconsider its proposal that service providers bill in less than one-minute increments. Contrary to the Commission's interpretation, TDDRA does not compel this result. Moreover, there is no evidence in the record that consumers have either been mislead by per-minute billing or have demanded billing in smaller increments.

Section 308.10(b) of the Proposal provides that, "[i]t is a deceptive practice and a violation of this Rule for the vendor to fail to stop the assessment of time based pay-per-call charges immediately upon disconnection by the caller." See Proposed Section 308.10(b), 63 Fed. Reg. at 58,564. As stated in the NPRM, the Commission believes that technology has made incremental billing possible. See 63 Fed. Reg. at 58,546. Relying on Section 5711(a)(2)(D) of TDDRA, which requires that pay-per-call service operators "stop the assessment of time-based charges immediately upon disconnection by the caller," see 63 Fed. Reg. at 58,545, the Commission concludes that "the Rule as mandated by Congress does not allow" a business to exercise business judgment in determining whether to bill in single-minute increments. See 63 Fed. Reg. at 58,546.

TSIA disagrees with the Commission. TDDRA's command that service providers stop billing immediately when the caller hangs up plainly requires service providers to bill consumers for no more time than they use. TDDRA, however, does not mandate the increments by which service providers must bill consumers. In other words, it is not inconsistent with TDDRA to stop the time by which consumers are billed immediately when they hang up, and then to bill that consumer in single-minute increments.

Not only does the Commission misread TDDRA's command that service providers must "stop the assessment of time-based charges immediately upon disconnection by the caller," but its interpretation conflicts with two other provisions of TDDRA expressly requiring service providers to disclose "the total cost or the cost per minute" of the call. See 15 U.S.C. §§ 5711a(1)(A), (a)(2)(A)(ii). Moreover, TDDRA's legislative history confirms that Congress intended Section 5711(a)(2)(D) to halt the then-existing practice of charging consumers for several minutes after they hung up. Congress did not intend to ban billing in one-minute increments. Additionally, Section 205 of the Telecommunications Act of 1934 vests authority in the Federal Communications Commission, not the Federal Trade Commission, to determine what billing increments should be used by interexchange carriers. See 47 U.S.C. § 205 ("The [Federal Communications] Commission is authorized and empowered to determine and prescribe . . . what practice is or will be just, fair and reasonable . . .").

Finally, TSIA agrees with AT&T that the Proposal would raise consumers' costs for audiotext services, as carriers and service providers will pass along to consumers the added costs of converting to incremental billing. Such costs would result from the necessary development and implementation of new software and reprogramming of switches and billing systems. These costs are unnecessary. Indeed, AT&T has perceived no appreciable demand for billing in other than one-minute increments and no evidence that consumers are confused or mislead by the current practice of billing in one-minute increments.

F. The Commission Should Reserve Judgment on Proper Methods for Advertising On-Line Until Its Formal Proceeding Addressing On-Line Advertising Has Concluded.

Finally, TSIA agrees with a number of other commentators that the Commission's proposal to establish even general guidelines for advertising on-line is imprudent in the course of this Rulemaking proceeding. The Commission is currently considering comments it received in connection with its proposal to issue a policy statement on the applicability of its rules and guides to electronic media. See 63 Fed. Reg. at 24,996 (May 6, 1998). Among other things, the Commission is considering how the "clear and conspicuous" standard found in many of its rules and guides should be interpreted in electronic media. For example, the Commission received comments on its proposal that disclosures in electronic media be unavoidable, easily accessible, proximate to representations requiring the disclosures, prominent, made without undue distraction, repeated adequately and "presented in the same mode (audio or visual)" as the underlying representation. See 63 Fed. Reg. at 25,002-03. In this vein, the Commission "is attempting to provide consumers with comprehensible disclosures to prevent deception, while not imposing undue burdens or restrictions on businesses in complying with the disclosure requirements." See 63 Fed. Reg. at 25,001.

In its proposed amendment to the 900-Number Rule, the Commission suggests requiring that "[i]n any advertising medium not specifically addressed in this Rule, [i.e., the Internet], all advertising disclosures must be clear and conspicuous and not avoidable by consumers acting reasonably." See Proposed Section 308.3(g), 63 Fed. Reg. at 58,561 (emphasis added). This clearly overlaps with the Commission's proposals for on-line advertising generally, as expressed in its May 6, 1998, Notice of Proposed Rulemaking. Because the Commission's judgment regarding on-line advertising standards in the context of 900-number advertising will have broad precedential effect, TSIA urges that the Commission reserve all judgments regarding on-line advertising until it has completed its current formal proceeding expressly on that issue, in which a far broader range of industries are participating.

II. ARGUMENT

A. The Commission Should Allow Consumers to Form Presubscription Agreements Using Prepaid, Debit, Check and Calling Cards.

The Proposal expressly rejects allowing consumers to form presubscription agreements using debit cards (also known in the industry as "check" cards) or calling cards. See 63 Fed. Reg at 58,538. According to the NPRM, "[t]o allow a calling card, debit card, or other means not within the ambit of both [the Truth in Lending Act ("TILA") and the Fair Credit Billing Act ("FCBA"), 15 U.S.C. §1601 et seq.] to substitute for an actual agreement with the person to be billed for the service would undermine the entire purpose of the presubscription agreement exception to the Rule. It would also undermine the Commission's mandate to promulgate rules substantially similar to TILA and FCBA." See id.

The Commission's proposal to retain credit and charge cards as the only means whereby consumers can access audiotext services via 800 or other toll-free numbers without having to enter into a presubscription agreement threatens the present and future viability of the industry, misinterprets Congressional intent regarding TDDRA, and frustrates Congress' attempt by means of the Telecommunications Act of 1996 to provide consumers greater choice in accessing such services.

1. The Express Language of TDDRA Does Not Mandate that the Commission Reject Prepaid, Debit, Check and Calling Cards as Means of Forming Presubscription Agreements.

TDDRA requires that the Commission provide consumers with billing and dispute resolution protections "substantially similar" to those which credit and charge card users enjoy under TILA and FCBA (and, of course, Regulation Z, 12 C.F.R. § 226, which the Federal Reserve System promulgated to implement TILA). Specifically, Title III of TDDRA provides as follows:

Rules Required. The Commission shall, in accordance with the requirements of this section, prescribe rules establishing procedures for the correction of billing errors with respect to telephone-billed purchases. The rules prescribed by the Commission shall also include provisions to prohibit unfair or deceptive acts or practices that evade such rules or undermine the rights provided to customers under this title.

The [Federal Trade] Commission shall promulgate rules under this section that impose requirements that are substantially similar to the requirements imposed, with respect to the resolution of credit disputes, under the Truth in Lending Act and the Fair Credit Billing Act (15 U.S.C. 1601 et seq.).

15 U.S.C. § 5721(a) (emphasis added).

By rejecting debit, check and calling cards as means by which consumers may form presubscription agreements without even suggesting that transactions using those payment methods be subject to the same dispute resolution procedures as consumers of 900-number audiotext services enjoy, the Commission has essentially interpreted Congress' mandate to adopt rules "substantially similar" to those of TILA and FCBA as meaning it must restrict consumers to using credit and charge cards which are actually subject to TILA and FCBA when forming presubscription agreements. The text of Title III of TDDRA, however, is not amenable to so strict a reading. It simply requires that consumers be afforded billing and dispute resolution protections "substantially similar" to those provided by TILA and FCBA. The text does not say, as the Commission now suggests, that such transactions must actually be subject to TILA and FCBA. Indeed, not only does the text of TDDRA fail to support the Commission's strict interpretation, but nothing in TDDRA's legislative history suggests that Congress intended consumers be so limited.

In effect, the Commission has presented itself with a false choice: either allow consumers to enter into presubscription agreements using prepaid, debit, check or calling cards, and thereby expose consumers to billing and collections procedures devoid of TILA and FCBA protections, or reject those billing options. However, the Commission has failed to consider a third option, which would allow those additional forms of payment but subject them by rule to billing and dispute resolution procedures "substantially similar" to those of TILA and FCBA, such as by simply applying the billing and dispute resolution procedures for audiotext services accessed via 900-numbers to all such transactions.

Under this approach, consumers using credit, prepaid, debit or check, charge or calling cards would be entitled to the full range of protections afforded to consumers of audiotext services provided via 900-numbers. They would be permitted to file notices of billing error and thereby trigger the service providers' obligations to conduct a "reasonable investigation." Service providers would be prohibited from reporting disputed amounts to "any person," including credit reporting agencies, until they had conducted a "reasonable investigation," and, even then, only if service providers also report that the amount is in dispute and provide contact information to the consumer. See generally 16 C.F.R. § 308.7.

TDDRA not only does not expressly require the Commission to reject payment methods which are not automatically subject to TILA and FCBA, but its legislative history suggests that Congress assumed that such transactions would be outside the coverage of the Rule altogether. In fact, in discussing the definition of "pay-per-call services," the Senate Report expressly explained that:

The Committee does not intend for this definition to include services where the customer pays by credit card or by check. In those situations, the customer knows the charges he or she is incurring, has the opportunity to decline acceptance of the service or product, and must take affirmative steps to pay for the service or product. In the case of 900 services, where the charges are automatically billed to the caller's telephone number or where the charges are automatically incurred simply by dialing the number, the Committee believes that added protections are necessary.

See S. Rep. No. 102-190, at 12 (1991) (emphasis added). As with credit cards and checks, consumers using prepaid, debit, check and calling cards to purchase audiotext services would know the charges they would be incurring, have the opportunity to decline acceptance of the service, and would be required to take affirmative steps to pay for the service. Rather than propose that all such transactions be unregulated, then, TSIA respectfully requests that the Commission allow consumers to use prepaid, debit, check or calling cards to form presubscription agreements, but subject all such transactions to the billing and dispute resolution provisions it promulgates for audiotext services provided via 900-numbers.

2. The Telecommunications Act of 1996 Expressly Permits Consumers to Use Prepaid, Debit, Check and Calling Cards to Pay for Audiotext Services.

Amending the 900-Number Rule to allow consumers to use prepaid, debit, check and calling cards to pay for audiotext services, and subjecting all such transactions to billing and dispute resolution procedures "substantially similar" to TILA and FCBA not only would satisfy TDDRA, but would also implement Congress' mandate, as expressed in the Telecommunications Act of 1996, that consumers be provided with such payment choices.

The Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat. 56 (1996), was an unmistakably comprehensive revision of the nation's telecommunications structure. An important result of these efforts was a directive that common carriers make changes in the tariffs and contracts they negotiate with 900-number service providers. To that end, the Act amended Section 228(c) of the Telecommunications Act of 1934 to allow consumers to use prepaid, debit or calling cards to form presubscription agreements.

As codified, 47 U.S.C. § 228(c)(7) and (9) provide as follows:

(7) A common carrier shall prohibit by tariff or contract the use of any 800 telephone number, or other telephone number advertised or widely understood to be toll free, in a manner that would result in --

(C) the calling party being charged for information conveyed during the call unless:

(ii) the calling party is charged for the information in accordance with paragraph (9).

(9) For purposes of paragraph (7)(C)(ii), a calling party is not charged in accordance with this paragraph unless the calling party is charged by means of a credit, prepaid, debit, charge, or a calling card and the service provider includes in response to each call an introductory disclosure message that --

(A) clearly states that there is a charge for the call;

(B) clearly states the service's total cost per minute and any other fees for the service or for any service to which the caller may be transferred;

(C) explains that the charges must be billed on either a credit, prepaid, debit, charge or calling card;

(D) asks the caller for the card number;

(E) clearly states that charges for the call begin at the end of the introductory period; and

(F) clearly states that the caller can hang up at or before the end of the introductory message without incurring any charge whatsoever.

See 47 U.S.C. § 228(c)(7), (9) (Supp. 1998). The plain language of these sections thus provides that common carriers must prohibit the use of 800 or similar numbers to purchase audiotext services unless consumers either enter into a written agreement or charge the services to a credit, prepaid, debit, charge or calling card.

In accordance with this Congressional mandate, the Federal Communications Commission adopted rules specifically providing for the use of prepaid, debit and calling cards to for presubscription agreements. For example, 47 C.F.R. § 64.1501(b) provides that:

[D]isclosure of a credit, prepaid account, debit, charge, or calling card number, along with authorization to bill that number, made during the course of a call to an information service, shall constitute a presubscription or comparable arrangement in an introductory message specified in §64.1504(c)(2) is provided prior to, or independent of, assessment of any charges.

In addition, 47 C.F.R. § 64.1504, like 47 U.S.C. § 228(c)(7) and (9), provides that common carriers must prohibit, by tariff or contract, the use of any 800 or other number advertised or widely understood to be toll free in a manner that would result in the caller being charged for information conveyed during the call unless the calling party has a written presubscription agreement or charges the information to his credit, prepaid, debit, charge or calling card and receives the introductory preamble disclosures provided in 47 U.S.C. § 228(c)(9)(A)-(F).

The legislative history of this provision provides further support for the conclusion that Congress mandated that consumers be permitted to form presubscription agreements using prepaid, debit, check and calling cards. In his statement appended to the Committee Report forwarding the Act to the full House, Representative Bart Gordon explained that it would require that consumers who access services via 800 numbers without signing a written contract be told that the cost of the service must be billed to a "credit, calling or prepaid card." See H.R. Rep. 104-204, at 213-14 (1996).

Neither the House Report, nor any other document within the legislative history of the Telecommunication Act of 1996, suggests that Congress intended that consumers be limited to forming presubscription agreements with only credit and charge cards. Indeed, as the Commission itself recognizes, Section 701(a) of the Telecommunications Act of 1996 does not even require, as TDDRA does, that consumers have rights "substantially similar" to those under TILA and FCBA when using the new expanded list of payment options. See 63 Fed. Reg. at 58,539.

Accordingly, the Commission's proposed rejection of prepaid, debit and calling cards as means of forming presubscription agreements is not only without authority, but flies directly in the face of both the Telecommunications Act of 1996 and the FCC regulations implementing it. This is contrary to Commission policy. For example, in its Statement of Basis and Purpose in promulgating the current version of the 900-Number Rule, the Commission relied on language in an FCC 900-number rule as its basis for requiring similar language in the FTC's rule. See 58 Fed. Reg. 42,352, 42,382 (August 9, 1993) ("this disclosure [involving the cost of the call] has been required under FCC regulations since 1991").

In short, Congress and the FCC have expressly provided that consumers should have the option of forming presubscription agreements using prepaid, debit, check and calling cards. The Commission cannot override this mandate by simply ordering that service bureaus and service providers may not accept these payment methods.

The Commission's argument that consumers are entitled to use prepaid, debit, check and calling cards so long as they enter into written presubscription agreements, see 63 Fed. Reg. at 58,539-40, does not save its Proposal. Congress intended that consumers could not only use these forms of payment to purchase audiotext services, but also use them as a means of forming presubscription agreements. There is simply no other way to read Section 228(c). See e.g., Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979) ("In construing a statute we are obliged to give effect, if possible, to every word Congress used"); Halverson v. Slater, 129 F.3d 180, 185 (D.C. Cir. 1997) ("Congress cannot be presumed to do a futile thing"); Coyne & Delany Co. v. Blue Cross & Blue Shield of Virginia, Inc., 102 F.3d 712, 715 (4th Cir. 1996); United States v. Bacon, 21 F.3d 209, 212 (8th Cir. 1994); Sutton v. United States, 819 F.2d 1289, 1295 (5th Cir. 1987); In re Rufus Beverly, Jr., 196 B.R. 128, 131-32 (Bankr. W.D. Mo. 1996); Adair v. Troy State Univ., 892 F. Supp. 1401, 1407 (M.D. Ala. 1995). Indeed, the only way to read Congress' order in the Telecommunications Act of 1996 that consumers be entitled to use prepaid, debit, check and calling cards to form presubscription agreements with TDDRA's command that billing and dispute resolution procedures be "substantially similar" to the protections offered under those acts is that Congress intended the Commission to apply standards "substantially similar" to TILA and FCBA to debit and calling cards. See Hohn v. United States, 118 S. Ct. 1969 (1998) ("We are reluctant to adopt a construction making another statutory provision superfluous"); OXY USA Inc. v. Mobil Exploration & Producing U.S., Inc., 122 F.3d 251, 258 (5th Cir. 1997) ("In construing statutes not harmonious with one another, courts presume that the legislature intended to maintain consistency in the law"); White v. Mercury Marine, 129 F.3d 1428, 1434 (11th Cir. 1997); Negonsott v. Samuels, 933 F.2d 818, 819 (10th Cir. 1991); Anderson v. FDIC, 918 F.2d 1139, 1143 (4th Cir. 1990) (stating that "a court should, if possible, construe statutes harmoniously . . . especially . . . if the statutes deal with the same subject matter, even if an apparent conflict exists").

3. The Commission's Mandate to Police Unfair and Deceptive Acts and Practices Does Not Compel that it Reject Prepaid, Debit, Check and Calling Cards.

The Commission further argues that the use of debit or check cards must be prohibited in absence of a presubscription agreement in order to avoid unfair and deceptive acts and practices. However, the Commission's approach is overbroad. The Commission's twin goals in enacting the 900-Number Rule -- providing consumers adequate notice before purchasing audiotext services and providing reasonable dispute resolution mechanisms so that they may get out of such purchases -- can be served by adopting a regulatory approach that is much less restrictive than the proposal. For example, consumers forming presubscription agreements by these means should receive the disclosures mandated by Congress in 47 U.S.C. § 228(c)(9),(4) and billing and dispute resolution protections "substantially similar" to those provided for users of credit and charge cards.

The Commission appears to argue that even if Congress did allow consumers to enter into presubscription agreements using prepaid, debit and calling cards, these means are likely to lead to unfair and deceptive acts and must therefore be rejected. See 63 Fed. Reg. at 58,540. This argument, which rests on the Commission's determination that its own judgment trumps that of Congress, will surely not survive scrutiny. See Salinas v. Rodriguez, 963 F.2d 791, 793 (5th Cir. 1992) ("When the regulations are contrary to the wording of the statute itself, . . . this Court must follow the plain statutory language and not the regulations"); Webb v. Hodel, 878 F.2d 1252, 1255 (10th Cir. 1989) ("Regulations are entitled to no deference if they are inconsistent with Congressional intent") (citations omitted); Scott v. Angelone, 771 F. Supp. 1064, 1066 (D. Nev. 1991) ("[A]n agency acts without authority when it promulgates a rule or regulation in contravention of the will of the legislature as expressed in the statute, or a rule or regulation that exceeds the scope of the statutory grant of authority").

4. The Costs of Banning Prepaid, Debit, Check and Calling Cards as Means of Forming a Presubscription Agreement Far Exceed the Benefits, Especially Where the Commission Could Simply Apply TILA and FCBA Billing and Dispute Resolution Provisions to Such Transactions.

Not only has Congress enacted legislation permitting consumers to use debit and check cards to pay for audiotext services, but the plain fact of the matter is that such payment methods are essential to the continued vitality of the audiotext industry. Many major banks issue debit cards carrying the MasterCard and Visa logo, and consumers have embraced this new technology, having used such cards in 1.94 billion transactions in 1997. See As Debit Evolves, So Do the Words that Consumers Use to Name It, Debit Card News, April 27, 1999, attached hereto as Appendix 2.

Visa itself is aggressively marketing its debit cards, having advertised its check card during Super Bowl XXXIII in January of this year. According to a recent news story, Visa's check card advertising campaign, which began in 1995, has resulted in approximately 70 million cards in circulation as of 1998. By 2001, Visa estimates that check card transactions will make up 10% of all consumer transactions in the United States. See Visa U.S.A. Debuts Two Visa Check Card Ads During Super Bowl XXXIII; Visa Check Card Spots To Focus on Card's Utility, Use in Everyday Life, PR Newswire, January 26, 1999, attached hereto as Appendix 3. According to Carl Pascarella, president and C.E.O. of Visa U.S.A., "[t]he check card is Visa's most popular new payment product in the history of our association. Consumer demand for more convenience, access to security in managing their money will continue to be the driving force behind the development of efficient, time-saving payment tools like the check card." See Visa Check Card Experiences Double-Digit Growth; Check Card Scores as Visa's Popular New Payment Product, Business Wire, April 21, 1998, attached hereto as Appendix 4. MasterCard is likewise continuing to spend heavily in promoting its MasterMoney debit card. See Shifting Gears, Faulkner & Gray, Inc., April 13, 1998, attached hereto as Appendix 5.

These facts demonstrate that consumers are increasingly demanding that merchants provide a means for purchasing services by means of debit and check cards and other prepaid methods. As the audiotext industry prepares for the future, it is essential that it be able to provide customers with the services they demand.

a. The Commission's Proposal is Unnecessary, as the Private and Public Sectors Have Provided the Protections the Commission Seeks for Consumers.

Both industry and the public sector have begun to provide protections for transactions accomplished by means of debit and check cards. First, a consumer's liability for unauthorized electronic fund transfers is limited by the Electronic Fund Transfers Act, 15 U.S.C. §§ 1693-1693r (1994 & Supp. III 1997), and Regulation E, which was promulgated under it. See 12 C.F.R. §§ 205.1-205.15 (1998). Regulation E provides that the term "electronic fund transfer" includes "[t]ransfers resulting from debit card transactions, whether or not initiated through an electronic terminal." 12 C.F.R. § 205.3(b)(5).(5) A consumer's liability for an unauthorized electronic fund transfer(6) is determined by the timeliness of the notice given by the consumer to the financial institution holding the account. If the consumer notifies the financial institution within two business days after learning about the loss or theft of the card or code used to access the consumer's account, the consumer's liability is the lesser of $50 or the amount of the unauthorized transfers that occurred before the consumer gave notice to the financial institution. 12 C.F.R. §305.6(b)(1).(7)

Visa's new self-imposed guidelines(8) go beyond Regulation E by waiving all liability for fraudulent transactions on all of its cards, including the Visa check card, if consumers report the loss or theft within two days of discovery of the loss. Otherwise, liability is capped at $50. See http://www.ramresearch.org/cardtrak/news/13aa_97.html, attached hereto as Appendix 6. One of Visa's largest issuers, Bank of America, limits cardholder liability to $0. See http://www.pirg.org/pirg\/onsumer/banks/debit/pr_visa.html, attached hereto as Appendix 7. In addition, Visa's new guidelines conform to the billing and dispute resolution regulations provided in Regulation Z.

In the past, the Commission has been careful not to eliminate emerging payment methods, especially when they are not "in and of themselves necessarily harmful." See Final Telemarketing Sales Rule, 60 Fed. Reg. 43,842, 43,851 (August 23, 1995) (refusing to require signed authorization for demand drafts, as such a requirement would "be tantamount to eliminating this emerging payment alternative"). Here, of course, not only are debit and check cards not harmful in and of themselves, but in many respects they afford consumers the same protections they enjoy with credit and charge cards. It is simply unnecessary for the Commission to override the will of Congress by rejecting these methods of forming a presubscription agreement, especially where both the public and private sectors are addressing the very issues about which the Commission is concerned.

b. Banning Prepaid, Debit, Check and Calling Cards as Means of Forming Presubscription Agreements is Tantamount to Illegalizing the Sale of Audiotext Services Provided by 800 and Other Toll-Free Numbers by Credit Card.

Revenues generated from credit card sales of audiotext services accessed via 800 or other toll free numbers comprise an important part of TSIA's members' revenues. Thus, not only would banning debit cards as a means of entering into presubscription agreements deprive the audiotext industry of an important source of future revenues (debit and check card transactions), but it would have the unintended effect of shutting down an important current source of revenue (credit card transactions). The Commission's proposal threatens the credit card income stream because the current state of technology simply does not enable merchants, such as TSIA's members, to determine whether a sixteen-digit account number provided by a consumer over the telephone belongs to a debit, check, charge or credit card.

Late last year, one of TSIA's members sent an e-mail to an address provided on Visa's Web site asking how his company could determine whether a number provided by a customer is a debit or credit card. A copy of that e-mail is reprinted below.

Sent: Tuesday, December 15, 1998 21:11

To: VisaExpo Correspondence

Subject: Question on Visa Check Cards

I am a merchant that accepts Visa on non-face-to-face transactions. For example, my company has numerous web sites which accept Visa. How can I know if a Visa card entered by the consumer over the Internet is a "check card" or a conventional credit card? Does Visa or its merchant banks issue check cards on unique bin's?

Visa responded as follows:

From: VisaExpo Correspondence[SMTP:webbalto@visa.com]

Sent: Tuesday, December 15, 1998 11:15 PM

Subject: RE: Question on Visa Check Cards

Thank you for your message. Currently, Visa makes no distinction between credit cards and check (debit) cards. Thank you for writing.

Accordingly, Visa itself recognizes that merchants are unable to discern whether a number provided by a customer relates to a debit or credit card. Were the Proposal to go into effect as written, then, service providers would be faced with the Hobson's choice of giving up all credit card sales, which make up an important part of their revenue, or face the possibility of violating the 900-Number Rule and accruing massive civil penalty liability.

In sum, the Commission's refusal to expand consumers' options for acquiring audiotext services via toll-free numbers frustrates the will of Congress, limits consumers' choices, deprives the audiotext industry of its best hope for continued growth and vitality while at the same time cutting off an important current income stream, and, overall, is unnecessary to accomplish the Commission's consumer protection objectives. The Proposal, indeed, is arbitrary and capricious, and is unlikely to survive a challenge under the Administrative Procedures Act. See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415-17 (1971).

B. Presubscription Agreements and PINs:

1. The Proposal's Requirement that Disclosures Be Received by Consumers Is Overbroad to Accomplish the Commission's Objectives.

The Proposal requires that consumers actually receive a unique PIN, together with written disclosures of all material terms and conditions associated with the presubscription agreement, including the service provider's name and address, a business telephone number that the consumer may use to obtain additional information or register a complaint, and the rates for the service, before the consumer can receive the service. See Proposed Section 308.2(i), 63 Fed. Reg. at 58,537-38 (explaining that "in every instance, an actual contractual agreement with the person to be billed for the service must be reached in advance of the provision of the service") (emphasis added).

TSIA agrees with the Commission that consumers should not incur liability for purchases of audiotext services until after they have received the appropriate disclosures. However, the Proposal is simply too burdensome, both for consumers and for service providers.(9) The Commission would have the service provider: (a) verify that the consumer is in fact the line subscriber ("[t]he presubscription agreement is never valid . . . unless it is reached with the person who will be billed for the service," 63 Fed. Reg. at 58,538); (b) provide the disclosures and a PIN in writing; (c) await a second call from the consumer; and then (d) bill the consumer for the service.

In order to streamline the process whereby service providers may provide, and consumers may receive, audiotext services via a presubscription agreement, TSIA proposes that service providers be permitted to give the disclosures listed above, as well as a PIN, orally during the first call to the service. If the service provider so chooses, it would then be entitled to provide the service during that same call. However, each such service provider would be obliged to assume the risk of providing an automatic credit to each consumer who alleged a billing error arising out of services accessed during the first call. In any event, the service provider would then send the disclosures and a PIN to each consumer who desires to enter into a presubscription agreement PIN, just as the Commission now proposes. All billing errors resulting from calls placed after consumers receive their written disclosures and a PIN would be subject to the same billing and dispute resolution procedures to which consumers of 900-number services would be entitled.(10)

The Commission's goals in this context, which TSIA endorses, are that consumers get full disclosures before incurring any liability for the purchase of audiotext services, and that consumers agree to the terms of the service in advance of incurring any liability. TSIA's proposal provides a means of accomplishing this objective without simply banning the provision of all audiotext services until the consumer receives the disclosures and PIN in writing.

2. The Commission Should Clarify the Extent to Which Service Providers Would Be Liable for Unauthorized Use of PINs.

The Commission should also narrow language which could reasonably be construed as providing strict service provider liability for unauthorized use of PINs. The Proposal's language that "[t]he service provider will be responsible for ensuring that the PIN is not distributed to anyone other than the person to be billed for the services under the presubscription agreement," see 63 Fed. Reg. at 58,537, could be read to hold service providers strictly liable not only for initially sending the PIN to the person to be billed, but also for all unauthorized use of PINs.

TSIA believes that its members should have no liability for unauthorized use of credit, prepaid, debit, check, charge or calling cards where they have had no role whatsoever in the theft or loss resulting in the unauthorized use. That is, service providers should not be liable where they neither know nor have reason to know that a consumer is using a PIN without authorization. While such a result may not be the intent of the Commission, TSIA is concerned that this vague language could be broadly interpreted in the future. Accordingly, TSIA respectfully requests that the Commission expressly provide, either in the text of the Rule or in the Statement of Basis and Purpose, that billing entities and service providers have no liability for unauthorized use of PINs where they neither knew nor should have known that the use was unauthorized.

3. The Commission Should Clarify Its Unique PIN Requirement to Prevent Unauthorized Access While Allowing Consumers to Have PINs They Are Likely to Remember.

The Commission should clarify how the unique PIN requirement will work in practice. The Proposal requires that each PIN be unique to the particular consumer to whom it is sent. See 63 Fed. Reg. at 58,536. On its face, then, where the service provider has a clientele of over 9,999 persons, the Proposal would prohibit the use of four-digit numbers which typically use. Moreover, the uniqueness requirement would, in many cases, prohibit consumers from choosing their own PINs, which would consequently reduce calling volume, as consumers are more likely to forget randomly-assigned numbers.

The policy underlying the Commission's proposal that each consumer be assigned a unique PIN is to "prevent unauthorized access by nonsubscribers" to the service. See 63 Fed. Reg. at 58,536. TSIA agrees with that policy, not only in terms of consumer protection, but also because it makes good business sense: consumers who have entered into presubscription agreements are unlikely to pay for services they did not use. TSIA is concerned, however, that if PIN numbers are too long or otherwise too difficult to remember, consumers may not access the services as much as they otherwise would if the industry were permitted to issue standard 4-digit PINs.

The Proposal goes far beyond state regulation of PIN numbers for ATM cards, which pose at least as great a threat of unauthorized use as audiotext services provided via 800 or other numbers advertised or widely understood to be toll free. For example,

Minnesota law prohibits the use of a person's social security number as the personal identification number or as any code to activate any electronic financial terminal. Minn. Stat. § 47.69(4).(11) Similarly, Montana prohibits a personal identification number from being a consumer's social security number, driver's license number or any other number assigned for other purposes to the customer. Mont. Code Ann. § 32-6-306(1) (1998).(12)
 
Under Rhode Island law, a financial institution or credit union may not mail its customers a card to access electronic banking devices or machines and the access card's personal identification number within three days of each other unless requested by the consumer. R.I. Gen. Laws § 19-3-13.1 (1998).

None of these laws goes as far as the Commission's Proposal to make each and every PIN unique to the consumer. Instead, they provide common-sense restrictions designed to limit unauthorized use while at the same time allowing PINs to be usable by consumers.

Accordingly, in order to accommodate both consumer protection and legitimate business interests, TSIA respectfully requests that the Commission make clear that it would consider PIN numbers to be unique, even if shared by other consumers, if the service provider is able to determine that the individual who called actually received the PIN and has authorized the service. For example, a service provider could give a consumer his or her own chosen PIN, and cross check that PIN against the ANI from which the call is made.(13)

C. The Dispute Resolution Process:

1. The Commission Should Revise Its Proposed Dispute Resolution Procedures to Make Them "Substantially Similar" to Those of TILA and FCBA.

While the Commission has emphasized its mandate to adopt billing and dispute resolution procedures "substantially similar" to those of TILA and FCBA, see 63 Fed. Reg. at 58,538, the dispute resolution procedures it proposes for 900-number audiotext transactions expand on Regulation Z in four important ways.

a. Detailed Response to Billing Error Notices, Mandatory Production of Documents.

First, the FTC Proposal goes beyond Regulation Z by requiring that service providers respond in detail to consumers' notices of billing error and provide documentary evidence supporting the service provider's position. Regulation Z simply requires the creditor to conduct a "reasonable investigation" and, if it continues to believe that the consumer owes the amount, send the consumer an explanation that "sets forth the reasons for the creditor's belief that the billing error alleged by the consumer is incorrect," and "furnish copies of documentary evidence of the consumer's indebtedness, if the consumer so requests." 12 C.F.R. § 226(f)(1)-(2). Under the Proposal, however, once a customer has submitted notice of a billing error, the billing entity or service provider must either immediately credit the amount or conduct a "reasonable investigation." If, upon completion of its "reasonable investigation," the billing entity or service provider continues to believe that the consumer owes the disputed amount, it must provide a written explanation which "shall, in every case, address each potential billing error, and address with particularity the relevant facts asserted by the customer." In addition, the billing entity or service provider must provide "copies of documentary evidence of the customer's indebtedness," whether or not the customer requests them. See Proposed Section 308.20(c)(2)(ii), 63 Fed. Reg. at 58,565 (emphasis added).

b. Mandatory Notice that Further Collection Efforts May Occur.

Second, the FTC Proposal goes beyond Regulation Z by requiring billing entities to provide notice that further collection efforts may occur. Under Regulation Z, if a creditor determines that a billing error occurred as asserted, it must, within the shorter of two complete billing cycles or 90 days after receiving the billing error notice: (1) correct the billing error and credit the consumer's account; and (2) mail or deliver a correction notice to the consumer. 12 C.F.R. § 226.13(e). Under the Proposal, on the other hand, the billing entity may either credit the disputed amount or, after conducting a "reasonable investigation," sustain the charges. If the billing entity decides to simply credit the disputed amount, it must correct any billing error and credit the customer's account and any related charges, and notify the customer of the correction. Unless there will be no subsequent collection efforts, the billing entity is also required to disclose to the customer that collection efforts may occur despite the credit, and must provide the names, mailing addresses, and business telephone numbers of the vendor, service bureau and providing carrier, as applicable, that are involved in the telephone-billed purchase, or provide a local or toll-free number the customer can call to obtain this information. Proposed Section 308.20(c)(2)(i), 63 Fed. Reg. at 58,565 (emphasis added).

c. Consumer May Escape Liability By Simply Signing a Declaration Denying All Knowledge of the Transaction.

Fourth, the FTC proposal far exceeds Regulation Z by allowing the consumer's declaration to rebut the billing entity's findings upon completion of its "reasonable investigation." Specifically, the Proposal provides that, if a billing entity relies on documents maintained in the ordinary course of business, such as call transport records, to gain a presumption that the services were actually provided to the person who received the bill, it must allow the customer to rebut this presumption with a declaration signed under the penalty of perjury. Proposed Section 308.20(c)(2)(ii) n.4, 63 Fed. Reg. at 58,565, n. 4. There is no analogous provision in Regulation Z.

d. Forfeiture of Right to Collect.

Fourth, the FTC Proposal exceeds Regulation Z by providing that failure to abide by the dispute resolution process will result in the billing entity, providing carrier, vendor or other agent forfeiting its right to collect the disputed amount. Proposed Section 308.20(i), 63 Fed. Reg. at 58,566. Regulation Z contains no analogous provision.

Because each of these provisions of the Proposal, standing alone, renders the Proposal out of "substantial compliance" with Regulation Z, they must not be incorporated in the final Rule.

2. 900-Number Audiotext Services:

a. The Commission's Proposal that Consumers Be Able to Rebut Business Records Must be Deleted Because it Contravenes the Will of Congress and Would Dramatically Affect the Pay-Per-Call Industry.

The Proposal would allow consumers to escape liability for accessing audiotext services by simply signing a declaration that they deny all knowledge of the call. See Proposed Section 308.20(c)(2)(ii), n.4. Of course, if this loophole makes its way to the Internet, the entire industry would be in serious jeopardy. Unscrupulous consumers of audiotext services need only dispute the charge and submit a declaration (forms for which would, of course, be readily available) to accomplish a theft of service.(14) In an age where millions of consumers have instant access to information via the Internet, the Commission's proposal to allow declarations to trump actual records created and maintained in the ordinary course of business is likely to lead to the demise of the industry.

Moreover, Regulation Z does not provide that consumers may escape their liability for credit and charge card purchases by simply signing a sworn declaration denying all knowledge of the transaction. Because this provision will have such a substantial effect of the collection of legitimate charges, it alone renders the entire Proposal far from "substantially similar" to TILA and FCBA. Of course, this contravenes the will of Congress. Accordingly, the Proposal's provision allowing consumers to trump business records with a consumer declaration must not become part of the final Rule.

b. If the Commission Nevertheless Allows Consumers to Rebut Business Records With a Declaration, It Should, at a Minimum, Restrict This Privilege to Consumers Who Have Not Previously Used Audiotext Services.

TSIA is strongly opposed to allowing consumers to wash away their obligations with a simple declaration. However, should the Commission nevertheless reject Congressional intent and allow this option to become part of the final Rule, TSIA asks that the Commission restrict the universe of consumers entitled to do so to those who are least likely to take advantage of the system. Previous users of audiotext services should be prohibited from taking advantage of the system by simply declaring that they have no knowledge of the call. Such consumers would have been well aware of their rights under TDDRA and the 900-Number Rule by virtue of having received billing error notices periodically with their statements.

Accordingly, TSIA proposes that the Commission add the definition of an "excepted consumer" (provided below) to the Rule's definitions, and exempt such consumers from the privilege of filing a declaration which could trump service providers' business records.

Excepted Customer means a customer that provides notice of a billing error to any billing entity regarding a charge for any audiotext service; and, prior to the date the call currently being made was placed, has: (A)(1) submitted a notice of billing error to the billing entity or to any other billing entity, vendor or information provider, regarding a charge for a different 900-number call; and, (2) did not, within ten (10) days of submitting the earlier notice of billing error, request a block on the customer's phone line pursuant to 47 U.S.C. § 228(c); or (B)(1) received an audiotext service via a number owned, operated, or controlled by any vendor, billing entity, or information provider (as demonstrated by the call detail record of such vendor, billing entity, or information provider) other that the billing entity at issue; and (2) failed to either (a) pay an invoice from such vendor, billing entity or information provider; or (b) submit a notice of billing error to such vendor, billing entity or information provider; or (C)(1) received an invoice for any audiotext service via a number owned, operated or controlled by the billing entity at issue; and (2) paid in full without submitting a notice of billing error or otherwise complaining to the billing entity.

c. The Commission Should Clarify Under What Circumstances Declarations Filed by Customers Entitled to Do So Would Trump Service Providers' Business Records.

TSIA respectfully requests that the Commission provide some guidance as to the circumstances in which the service provider's business records will trump the consumer declaration. To that end, TSIA proposes adding the following language in a footnote:

Whether a consumer's declaration will successfully rebut the presumption that goods and services were actually transmitted or delivered will generally depend on the facts and circumstances of each case, including whether the consumer has provided supporting documents reasonably available to him or her, such as a police report in the event of an alleged theft of service during a break-in, airline or other travel tickets and/or hotel receipts in the event the consumer alleges he was out of town when the calls were made, a birth certificate in the event the consumer alleges that the calls were made by a minor, or a corroborating letter or other document from the consumer's LEC in the event the consumer alleges that the billing error is the result of crossed wires, together with the declaration.

While TSIA recognizes that it would be impossible to anticipate all possible scenarios whereby a consumer's declaration would (and would not) trump the service provider's business records, these criteria will give the industry much-needed certainty in conducting its business affairs.

3. Non-Blockable Telephone-Billed Purchases: The Commission Should Make Clear Under What Circumstances a Taped Authorization Will Qualify as "Express Authorization"

The Commission should also make clear the circumstances in which a taped authorization satisfies the Proposal's "express authorization" requirement. The Proposal would require service providers to possess "express authorization" by the billed consumer before billing for the calls. See Proposed Section 308.17, 63 Fed. Reg. at 58,564. While the Proposal states that "[f]or example, a tape recording of the person to be billed for the service being informed of the material terms of the agreement and then agreeing to make the purchase on those terms and pay the charges, would constitute evidence of express authorization," see 63 Fed. Reg. at 58,549, it is unclear whether and, if so, under what circumstances this "evidence" would be dispositive. To remedy this deficiency, TSIA proposes adding the following language in another footnote:

Service providers shall be entitled to a presumption that they have obtained express authorization of the person to be billed for the purchase by obtaining a tape-recorded (or digitally-recorded) verification of the consumer being informed of the material terms of the agreement and then agreeing to make the purchase on those terms and pay the charge, and confirming that they are the responsible billing party for the telephone number to which the purchase will be billed.

Thus, where service providers obtain tape-recorded (or digitally-recorded) verification proving that a consumer received and agreed to all material terms of the purchase, and where the consumer further confirms that he or she is the responsible billing party for the telephone number to which the purchase will be billed, this tape recording (or digital recording) should be dispositive proof of "express authorization," as required by Proposed Section 308.17.

D. The Commission Should Amend The 900-Number Rule to Expressly Allow for Check Debiting.

The Commission's Proposal fails to authorize check debiting as a method which consumers can use to form presubscription agreements.

Check debiting is not new to the Commission. Indeed, pursuant to the Telemarketing Sales Rule, 16 C.F.R. § 310, the Commission currently regulates this payment method in telemarketing transactions. See 16 C.F.R. § 310(a)(3). Moreover, the Commission has recently accepted a settlement agreement expressly allowing check debiting as a means of paying for audiotext services provided by means of a toll-free number. See FTC v. Interactive Audiotext Svc., No. CV 98-3049 CBM (Dec. 16, 1998). Specifically, the Order in that case borrows from the Telemarketing Sales Rule, so that consumers will be deemed to have authorized the purchase of audiotext services where they provide express written authorization; express oral authorization which is tape-recorded(15) and evidences that the consumer received eight specified disclosures; or written confirmation of the transaction, sent to the consumer prior to submission for payment of the consumer's check, including all of the disclosures required for oral authorization and the procedures whereby the consumer can obtain a refund if the confirmation is inaccurate.

While check debiting is not expressly subject to TILA and FCBA, the Commission need only amend the Rule to provide that the billing and dispute resolution provisions applicable to the purchase of audiotext services accessed via 900-numbers apply to transactions paid for by check debiting.

E. The Commission Should Allow Fractional Billing.

TSIA urges the Commission to reconsider its proposal that service providers bill in less than one-minute increments. Contrary to the Commission's interpretation, TDDRA does not compel this result. Moreover, there is no evidence in the record that consumers have either been mislead by per-minute billing or demanded billing in smaller increments.

Section 308.10(b) of the Proposal provides that, "[i]t is a deceptive practice and a violation of this Rule for the vendor to fail to stop the assessment of time based pay-per-call charges immediately upon disconnection by the caller." See Proposed Section 308.10(b), 63 Fed. Reg. at 58,564. According to the NPR, the Commission believes that technology has made incremental billing possible. See 63 Fed. Reg. at 58,546. Relying on Section 5711(a)(2)(D) of TDDRA, which requires that pay-per-call service operators "stop the assessment of time-based charges immediately upon disconnection by the caller," see 63 Fed. Reg. at 58,545, the Commission concludes that "the Rule as mandated by Congress does not allow" service providers to exercise their business judgment in determining whether to bill in single-minute increments. See 63 Fed. Reg. at 58,546.

TSIA disagrees with the Commission that TDDRA requires billing to be in sub-one minute increments. TDDRA's command that service providers stop billing immediately when the caller hangs up plainly requires service providers to bill consumers for no more time than they use. As pointed out in the comments of the Billing Reform Task Force and the International Telemedia Association, however, TDDRA does not mandate the increments by which service providers must bill consumers. In other words, it is not inconsistent with TDDRA to stop the time by which consumers are billed immediately when they hang up, and then to bill that consumer in single-minute increments.

Not only does the Commission misread TDDRA's command that service providers must "stop the assessment of time-based charges immediately upon disconnection by the caller," but its interpretation conflicts with other provisions of TDDRA. Two provisions within TDDRA require service providers to disclose "the total cost or the cost per minute" of the call. See 15 U.S.C. §§ 5711a(1)(A), (a)(2)(A)(ii). If Congress had intended that consumers be billed in increments other than single minutes, it is reasonable to conslude that it would have required that service providers disclose the costs otherwise.

TDDRA's legislative history confirms that Congress did not intend Section 5711(a)(2)(D) to require service providers to charge consumers by less than one-minute increments. Instead, as noted by the Billing Reform Task Force and the International Telemedia Association, Congress intended Section 5711(a)(2)(D) to halt the then-existing practice of charging consumers for several minutes after they hung up.

[Pay-per-call providers] must stop billing for pay per call services when the caller hangs up. When calls are placed to a 900 service and the caller is billed on a per minute or time basis, billing should cease when the caller hangs up the telephone. The Committee recognizes that it takes time for the telephone system to recognize that a caller has concluded a call; however, billing should cease within seconds, not minutes.

See S. Conf. Rep. No. 190, 102d Cong., at 19 (1991) (emphases added). The legislative history is clear that Congress did not intend to prohibit one-minute or other unit-based billing, or consider it a deceptive practice.

Moreover, Section 205 of the Telecommunications Act of 1934 vests authority in the Federal Communications Commission, not the Federal Trade Commission, to determine what billing increments should be used by interexchange carriers. See 47 U.S.C. § 205 ("The [Federal Communications] Commission is authorized and empowered to determine and prescribe . . . what practice is or will be just, fair and reasonable . . ..").

Finally, TSIA agrees with AT&T that the Proposal would raise consumers' costs for audiotext services, as carriers and service providers pass along the added costs of incremental billing to consumers. These costs relate to the development and implementation of new software and the reprogramming of switches and billing systems. These costs are unnecessary. Indeed, AT&T has perceived no appreciable demand for billing in other than one-minute increments and no evidence that consumers are confused or mislead by the current practice of biling in one-minute increments.

F. On-Line Advertising: The Commission Should Wait Until its Formal Process Addressing On-Line Advertising Is Completed Before Adopting On-Line Advertising Standards.

Finally, TSIA agrees with a number of other commentators that the Commission's proposal to establish even general guidelines for advertising on-line is imprudent in the course of this Rulemaking proceeding. The Commission currently considering comments it received on its proposal to issue a policy statement on the applicability of its rules and guides to electronic media. See 63 Fed. Reg. 24,996 (May 6, 1998). Among other things, the Commission is considering how the "clear and conspicuous" standard should be interpreted in electronic media. For example, the Commission received comments on its proposal that disclosures in electronic media be unavoidable, easily accessible, proximate to representations requiring the disclosures, prominent, made without undue distraction, repeated adequately and "presented in the same mode (audio or visual)" as the underlying representation. See 63 Fed. Reg. at 25,002-03. In this vein, the Commission "is attempting to provide consumers with comprehensible disclosures to prevent deception, while not imposing undue burdens or restrictions on businesses in complying with the disclosure requirements." See 63 Fed. Reg. at 25,001.

In its proposed amendment to the 900-Number Rule, the Commission suggests requiring that "[i]n any advertising medium not specifically addressed in this Rule, [i.e., the Internet], all advertising disclosures must be clear and conspicuous and not avoidable by consumers acting reasonably." See Proposed Section 308.3(g), 63 Fed. Reg. at 58,561. This clearly overlaps with the Commission's proposals for on-line advertising generally, as expressed in its May 6, 1998, Notice of Proposed Rulemaking. Any determination the Commission makes regarding on-line advertising standards in the context of audiotext services would have precedential effect in its determination regarding on-line advertising standards generally. However, only a small fraction of parties interested in on-line advertising standards will have commented in this rulemaking proceeding. Accordingly, the TSIA respectfully requests that the Commission reserve its judgment on on-line advertising standards until it has received comments on any general on-line advertising policy statement it issues and, based on those comments, issues a final policy statement.

III. CONCLUSION

For the foregoing reasons, the TSIA respectfully requests that the Commission revise its current recommended changes to the 900-Number Rule to take account of the proposals discussed herein.

Respectfully submitted,

THE TELESERVICES INDUSTRY ASSOCIATION

By its attorneys:

_______________________
Lewis Rose, Esq.
D. Reed Freeman, Jr., Esq.
ARENT FOX KINTNER PLOTKIN & KAHN, PLLC
1050 Connecticut Avenue
Washington, D.C. 20036
202/857-6012

Dated: March 10, 1999

1. A redline version of TSIA's proposal comparing only the sections of the FTC's Proposal which TSIA proposes changing is attached hereto as Appendix 1.

2. The members of TSIA have reviewed draft comments of the Billing Reform Task Force and the International Telemedia Association and, except where those comments are inconsistent with the comments of TSIA, generally agree with the proposals offered therein.

3. Because these terms "debit card" and "check card" are used synonymously in the industry, TSIA discusses them together throughout these comments.

4. These disclosures are: (a) that there is a charge for the call; (b) the service's total cost per minute and any other fees for the service or for any service to which the caller may be transferred; (c) that the charges must be billed on either a credit, prepaid, debit, charge or calling card; (d) that the caller must provide his or her card number; (e) that charges for the call begin at the end of the introductory period; and (f) that the caller can hang up at or before the end of the introductory message without incurring any charge whatsoever.

5. An "electronic fund transfer" is "any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through . . . [a] telephonic instrument . . . so as to order, instruct, or authorize a financial institution to debit or credit an account. 15 U.S.C. §1693a(6).

6. An "unauthorized electronic fund transfer" is "an electronic fund transfer from a consumer's account initiated by a person other than the consumer without actual authority to initiate such transfer and from which the consumer receives no benefit, but the term does not include any electronic fund transfer . . . initiated by a person other than the consumer who was furnished with the card, code, or other means of access to such consumer's account by such consumer . . . ." 15 U.S.C. §1693a(11).

7. If, however, the consumer fails to notify the financial institution within two business days, the consumer's liability is the lesser of $500 or the sum of: (a) $50 or the amount of unauthorized transfers that occur within the two business days, whichever is less; and (b) the amount of unauthorized transfers that occur after the close of two business days and before notice to the institution. 12 C.F.R. §205.6(b)(2).

8. A copy of Visa's guidelines will be submitted to the Commission prior to the May 20-21 hearing to discuss the comments filed in connection with this proceeding.

9. The Proposal may, in fact, increase the rate of misuse of PINs. Providing PINs by mail can result in misuse through delivery to the wrong address or interception at numerous points in transit to the consumer.

10. TSIA's proposal in this regard goes beyond the Commission's own enforcement policy. In FTC v. Interactive Audiotext Svc., Civ. No. 98-3049 CBM (December 16, 1998), for example, the Commission did not impose the billing and dispute resolution procedures of either Regulation Z or the 900-Number Rule on billing disputes relating to audiotext services provided via 800 or other numbers advertised or widely understood to be toll-free.

11. "Electronic financial terminal" is "an electronic information processing device that is established to do either or both of the following: (1) capture the data necessary to initiate financial transactions; or (2) through its attendant support system, store or initiate the transmission of the information necessary to consummate a financial transaction." Minn. Stat. §47.61(3)(a).

12. In addition, a financial institution's off-site machines cannot print a customer's personal identification number on the receipt provided at the time of the transaction. Mont. Code Ann. §32-6-306(2).

13. TSIA's members acknowledge that a consumer's ANI cannot constitute a valid PIN.

14. Consumer fraud is a very real and serious problem for the industry. In fact, as explained in comments filed by the Interactive Services Association, the industry has lost hundreds of millions of dollars in billed, but unpaid, 900-number services alone.

15. TSIA proposes that the Commission also allow digital recordings to prove that consumers authorized the purchase of audiotext services.

Federal Trade Commission