May 2, 1997
Federal Trade Commission
6th Street and Pennsylvania Avenue NW
Washington, DC 20580
RE: 900-Number Rule Review -- Comment FTC File No. R611016
Request to Participate in Public Workshop
The National Consumers League respectfully submits these comments in response to the Federal Trade Commission's March 12 request for comments regarding the review of the 900-Number Rules. NCL is a private, nonprofit, membership organization representing consumers in the marketplace and the workplace since its founding in 1899. Because NCL receives a significant number of complaints concerning pay-per-call services through its National Fraud Information Center, we would like to participate in the public workshop which the FTC will convene on this subject on June 19 and 20, 1997.
NCL's Role in Fighting Telephone-Related Fraud and Abuse
NCL has taken an active role in educating consumers and advocating for appropriate consumer protections concerning telephone-related fraud and abuse. In 1992, the League created the National Fraud Information Center, a unique hotline service, 1-800-876-7060, through which consumers can seek advice about telephone solicitations and report possible fraud and deception.
In 1996, the NFIC expanded its services to cover scams in cyberspace. Through the NFIC web site at http://www.fraud.org, consumers can get general advice about both telephone and Internet solicitations, pose specific questions by e-mail, and report possible fraud and deception via an online complaint form.
Consumers' reports to the NFIC about fraudulent or deceptive telephone and Internet promotions are uploaded daily to the data base maintained by the Federal Trade Commission and the National Association of Attorneys General. Reports are also distributed to over 160 individual federal, state and local law enforcement agencies.
This information alerts agencies to matters which they may wish to investigate. It also aids law enforcement authorities in prosecuting fraud or deceptive practices and identifying victims.
In addition to assisting consumers and law enforcement agencies through the fraud center, NCL raises public awareness about telephone-related fraud and deception through the Alliance Against Fraud in Telemarketing, a coalition coordinated by the League. The Alliance brings representatives from consumer protection and law enforcement agencies, consumer advocacy organizations, consumer helplines, businesses and trade associations together to learn about telephone-related fraud and abuse and share strategies for educating consumers about them. For instance, at an Alliance meeting last October, Federal Communications Commission staff made a presentation about international phone fraud. At the January, 1997 meeting of the Alliance, the NFIC's Internet fraud coordinator alerted members to the Moldova computer-generated international phone scam that was just emerging.
NCL also conducts consumer education and advocates for consumer protection by working with the media, distributing publications of its own and from other sources, making speeches, participating in conferences, meeting with members of the relevant industries, and submitting regulatory and legislative testimony. NCL commented on the 900-Number Rule when it was proposed in 1992 and participated in the workshops held by the FTC in that regard.
I. General Issues for Comment
1. The 900-Number Rule has been successful in reducing some of the abuses in pay-per-call promotions that spurred the enactment of the Telephone Disclosure and Dispute Resolution Act of 1992. Pay-per-call problems ranked as the 8th most frequent complaints reported to the NFIC in 1992, but fell precipitously after the Rule took effect, to 15th place in 1993, 16th place in 1994.
Services using 900 number prefixes are still promoted for weather forecasts, sports scores, polls, and even reports from certain Better Business Bureaus. It does not appear that that the Rule has been overly burdensome on legitimate 900-number service providers.
However, the Rule has not eliminated all pay-per-call problems. Pay-per-call complaints made to the NFIC have risen in the last two years, to 13th place in 1995 and 12th place in 1996. Most of the pay-per-call complaints that the NFIC now receives concern charges for 800 number calls; in 1996, the NFIC received three times as many complaints concerning 800 numbers as 900 numbers. In addition, consumers are also reporting fraud involving international phone numbers promoted for information and entertainment services. Furthermore, since the beginning of 1997, the NFIC has received dozens of complaints concerning computer-generated international phone scams. Ironically, it is probably the effectiveness of the Rule concerning pay-per-call services with 900-number prefixes that has led con artists to find alternate numbers through which to perpetrate their schemes. These abuses are resulting in exorbitant phone bills for consumers and substantial losses for telephone companies.
2. Consumers clearly benefit from the disclosures mandated by the Rule in advertising and at the beginning of the calls, which are intended to ensure that they understand how much the pay-per-call services will cost and exactly what services will be provided before they incur any expenses. The billing and collection provisions, and the responsibilities placed on entities that provide service in connection with pay-per-call services also protect consumers and the legitimate members of this industry. However, as Congress has recognized in Section 701 of the Telecommunications Act of 1996, the Rule must be updated and expanded in light of abuses in charges for calling toll-free numbers, changes in the telecommunications industry, and new forms of fraud.
The scope of the Rule must be broadened so that cost and other vital information is provided for all information and entertainment services for which a consumer will be charged on the basis of completing a call, regardless of the prefix used or whether the call is billed at a tariffed rate. The requirements for "presubscription agreements" must be tightened to prevent con artists from continuing to exploit that loophole. Furthermore, consumers should be provided with more information about the information and entertainment service providers on whose behalf they are being billed, and given more protection concerning disputed bills for these services.
10. Pay-per-call services covered by the Rule should include any information or entertainment services for which a consumer will be charged on the basis of completing a call, regardless of the types of number dialed or whether the charge is greater than, or in addition to, the charge for transmission of the call. This change in the definition of pay-per-call services is needed to address the fact that the same types of information and entertainment services that have been provided through 900 numbers are now being provided through 800 and international phone numbers.
It is clear from the complaints that the NFIC receives concerning international pay-per-call services that consumers do not realize that they are making international calls, no matter whether they are direct-dialing the numbers or being connected to them by some other means. Furthermore, in the first few months of 1997, the NFIC has received 68 complaints from consumers concerning bills for international calls resulting from downloading pictures from certain Internet sites. Apparently, these viewer programs actually disconnected consumers from their regular Internet service providers and reconnected them to the Internet through an international phone number. This new form of fraud has saddled consumers with telephone bills ranging from hundreds to thousands of dollars, not only for the time that they viewed the pictures, but for the entire time they stayed on the Internet until they shut their computers off.
International calls usually cost far more than domestic long-distance calls, even if they are billed at the normal rate, with no additional charge for transmission. Consumers need the same disclosures and protection if they are connecting to information or entertainment services through international phone numbers as they do for pay-per-call services accessed through other numbers.
11. In light of deregulation in the telecommunications industry, and the emergence of resellers and others that may provide or facilitate pay-per-call services, the FTC should carefully examine the exclusion of "common carriers" from the definition of "service bureaus." The service that is being provided, not the entity that is providing it, should determine who is subject to the Rule.
12. Con artists have taken advantage of the "presubscription agreement" provision of the Rule to make unauthorized charges for calls to 800 numbers. Most of the 800 number complaints that the NFIC receives are from consumers who thought the calls were free but were either charged for them, or were charged for services they did not agree to as a result of the calls, such as club memberships or voice mail. In 1996, the NFIC received 85 complaints against one Texas-based company alone concerning unauthorized charges made for voice mail service after the consumers called an 800 number psychic service for "free" readings.
In some cases, the consumers assert that they never called the 800 numbers for which they were billed. In others, the charges resulted from children calling 800 numbers and providing their parents' credit card or bank account numbers in order to connect to sex lines or other pay-per-call services. One California woman was charged for collect calls from a Canadian company, apparently initiated by calls that her children made to an 800 number. She had attempted to prevent unauthorized pay-per-call charges by putting a 900 number block on her telephone.
The majority of disputed 800 number charges appear on consumers' phone bills, but the NFIC also receives complaints from consumers whose credit card accounts were charged or bank accounts were debited without their authorization as a result of calls to 800 numbers. Consumers are sometimes asked for financial information under various ruses; to verify their identities, for instance, or for the promised sweepstakes winnings to be deposited into their accounts. Consumers' financial information may already be in the possession of an information or entertainment service provider because it was previously supplied for another purpose, or it was obtained from other sources.
While consumers can contest unauthorized credit card charges, it is difficult for them to prove that they never agreed to pay for 800 calls, especially when they did call the numbers in question. It is even more difficult to dispute debits that have already been deducted from their bank accounts. Several consumers have reported to the NFIC that when they questioned the validity of 800 or 900 number charges, the information providers played them audio tapes "documenting" that the required disclosures had been made. However, these consumers contend that the voices on the tapes were not theirs or anyone in their households.
There is also the potential for abuse if presubscription agreements can be created by assessing the telephone charges to calling cards that are offered by pay-per-call promoters in connection with their information or entertainment services. If the calling cards are provided merely as a way to charge consumers for the calls they made to obtain them, and there is no prior written agreement detailing the terms of their use or cost, this would simply be an end-run around the Rule. As we have already seen, any loopholes that exist will be exploited by clever criminals.
If pay-per-call services are exempted from the preamble and other provisions of the Rule based on presubscription or comparable agreements, those agreements should be memorialized in writing. Such agreements should not be created merely by the act of providing credit card or bank account information, or subscribing to a calling card, on the telephone, and no charges or debits should be made until a copy of the written agreement has been sent to the consumer. This is especially important if the agreement is to result in recurring charges for services.
13. The Rule should specify reasonable requirements for clear and conspicuous disclosure of cost and other information related to pay-per-call services advertised on the Internet or on commercial online services. This change is needed to ensure that consumers are provided with the same information in cyberspace that they are entitled to when they are solicited for pay-per-call services through other forms of media.
15. About one-quarter of the 900 number complaints that NFIC received in 1996 involved so-called sweepstakes. The consumers mistakenly believed that they had to call the 900 numbers in order to claim their winnings (which usually turned out to be coupons discounts on merchandise). Even when sweepstakes solicitations explain how to enter without making 900 number calls, as required by the Rule, they urge consumers to call instead, implying that their written entries may be delayed. Consumers are also discouraged from participating by mail with stern reminders that they will be disqualified if their entries do not conform to the exact specifications.
Furthermore, in print solicitations, the alternative entry information and the odds of obtaining the various prizes are usually found in small print, or on the back of the materials sent to consumers. The Rule should require that the alternative means of entry, odds of winning, and any prize descriptions that are made must be provided immediately after the first reference to the 900 number. In print materials, this information should appear on the front, in large type, directly adjacent to the 900 number. Consumers should not have to make another call to get the alternative entry information, especially in light of the air of urgency that most sweepstakes solicitations create.
16. The NFIC receives complaints from consumers about messages to call 900 numbers, 800 numbers, and international phone numbers left on their answering machines or pagers, or transmitted via E-mail. In some cases, there is no explanation for the call; in others, consumers are told that there is a family emergency, or an urgent legal problem.
It is impossible to leave detailed messages on most pagers, and answering machines provide only limited time for messages. Furthermore, unsolicited E-mail violates Internet codes of conduct and most service providers' written terms of service. Therefore, unsolicited messages left on answering machines, pagers and computers for services covered by the Rule should simply be prohibited.
IV. Operation & Standards
25. Most of the 900 number complaints the NFIC receives are from consumers who contend that they never made the calls for which they are being billed. These include situations in which:
- the only person at that number was out of town when the calls were made;
- at the time the calls were made, the consumer did not have that phone number;
- the consumer already had a 900 number block on the phone;
- the person's name, address and/or credit card number on the bill was not the consumer's;
- an elderly woman living alone was charged for calls to sex lines;
- the calls were made from a town in another state that the consumer never visited;
- the bill listed multiple charges for calls to different numbers at the exact same time and date.
These consumers believe that they have received fictitious, or "phantom" bills for calls that they never made. Several of the 900 number complaints that the NFIC received in 1996 were against a Seattle company that debited the bank accounts of consumers who claim they never made the calls. While blocking can help to reduce the potential for unauthorized 900 number charges, it does not prevent abuses that can occur when consumers' telephone numbers and other personal information, which can be obtained from a variety of legitimate and illicit sources, are used to falsely bill them for pay-per-call services.
V. Billing and Collection
28. While most of the complaints that the NFIC receives concerning pay-per-call services involve charges on consumers' telephone bills, charges are also made on credit cards or debited from consumers' bank accounts. In a small number of cases, bills for pay-per-call services are sent directly from the provider or from a non-telephone company entity. It is confusing to consumers when the name on the bill does not correspond to the service they may have used.
29. Presently, consumers are at the mercy of billing entities' good will policies concerning disputed charges for international calls. Some billing entities forgive part of the amount on a one-time basis; others insist on full payment. Consumers should not be faced with the possible loss of their long-distance service for failure to pay disputed international calls for information or entertainment services. Therefore, the dispute rights provided to consumers under the Rule must be expanded to cover calls to international numbers used to provide pay-per-call services.
31. To help consumers resolve problems with phantom bills and other disputed pay-per-call charges, the names of the actual information or entertainment services and how to reach them should appear on the bills. Many of the consumers who contact the NFIC are not sure who their complaint are against, and report that they have difficulty finding out how to contact the pay-per-call company. They are often given the "run-around" by being referred from one number to another, and frustrated in their attempts to find out the basis for the charges.
We applaud the FTC's efforts to combat pay-per-call abuses. NCL looks forward to participating in the discussions concerning the changes that are needed to protect consumers in the evolving marketplace for information and entertainment services.
Linda F. Golodner, President
National Consumers League
Susan Grant, Vice President Public Policy Director,
National Fraud Information Center
National Consumers League