March 10, 1999
Office of the Secretary, Room 159
Federal Trade Commission
6th Street and Pennsylvania Avenue, NW
Washington, DC 20580
RE: Pay-Per-Call Rule Review-Comment File No. R611016
The National Consumers League respectfully submits the enclosed comments to the Federal Trade Commission in the matter cited above and will convey by separate notice its desire to participate in the public workshop.
If there are any questions in this regard, please contact me at (202) 835-3323. Thank you for the opportunity to comment on this important issue.
Vice President for Public Policy
Comments to the Federal Trade Commission
by the National Consumers League
concerning the Pay-Per-Call Rule Review
FTC File No. R611016
The National Consumers League applauds the Federal Trade Commission's proposal to revamp the Pay-Per-Call Rule to protect consumers from abuses in the sale of audiotext services and misuse of the telephone billing system. One hundred years ago, when the League was founded, no one could have imagined the services that are available today through the telephone, the many different ways that consumers can pay for them, or the technology that makes it all possible. But the basic consumer issues have not changed: informed choice; fair billing; and practical recourse for disputes. It is with these principles in mind that we have reviewed the proposed Rule and offer our comments.
NCL is a private, nonprofit membership organization representing consumers in the marketplace and the workplace. In 1992, the League responded to the growing menace of telemarketing fraud by creating the National Fraud Information Center, a unique hotline service. Through a toll-free number, 1-800-876-7060, or the www.fraud.org web site launched in 1996, consumers can get advice about telephone solicitations and report possible fraud. Fraud reports are relayed to a database maintained by the Federal Trade Commission and the National Association of Attorneys General. They are also transmitted electronically to more than 160 federal, state and local law enforcement agencies. This information alerts agencies to matters that may merit investigation and helps them build their cases against fraudulent operators.
In addition, and even more important, the advice that consumers receive from the NFIC helps them recognize the danger signs of fraud and avoid being victimized in the future.
The League also promotes consumer awareness about telemarketing fraud through other means -- its www.nclnet.org web site, media interviews, coalitions such as the Alliance Against Fraud in Telemarketing, which NCL coordinates, and other public outreach activities.
Overall Telephone-Billed Fraud Statistics
Since the inception of NCL's National Fraud Information Center program, pay-per-call services have consistently ranked in the top 20 categories of telemarketing fraud. Initially falling after the original Rule took effect in 1993 from 8th place in 1992 to 15th place in 1993, and to a low of 16th place in 1994, pay-per-call began to rise again in 1995. By the end of 1998 it once again ranked as the 8th most frequent telemarketing fraud reported to the NFIC.
Even more alarming is the surge of complaints in a new category, cramming. Coined by the media in 1997, the word cramming refers to third-party charges that appear (and often recur monthly) on consumers' phone bills for services that they never requested such as voice mail, paging, personal 800 numbers, or even non-telecommunications items like club membership. Previously included in the pay-per-call category if they were related to calls to pay-per-call services, these incidents began to be tracked separately as cramming in the NFIC database in October of 1997. By the end of 1998, cramming was the #1 telemarketing fraud, with almost twice as many reports (2734) made to the NFIC as the #2 two category, advance fee loans (1492), and nearly ten times more than pay-per-call services (283). A chart illustrating the numbers of pay-per-call and cramming complaints is attached to these comments.
Of all payments consumers reported making in connection with fraudulent telemarketing transactions in 1998, 43 percent were via their telephone bills (this reflects not only cramming and pay-per-call complaints but slamming, which is unauthorized carrier switching). Clearly, the telephone billing structure has become an attractive means of billing and collection for a wide variety of services. Unfortunately, it has also attracted a number of unscrupulous operators who are abusing the system for fraudulent purposes. They have recognized loopholes and gaps in the original Pay-Per-Call-Rule and capitalized on them.
Because of those loopholes and gaps, consumers who are victims of telephone-billed fraud find themselves without the defenses and remedies that the Rule provides. Therefore, it is crucial for the Rule to be revamped to address not only continued deceptive acts and practices in connection with traditional pay-per-call services but all telephone-billed purchases (other than for normal local and toll service).
Nature of Complaints
Before the deadline for comments in this matter was extended, NCL made a detailed analysis of the pay-per-call complaints that the NFIC received during the first eleven months of 1998. We also examined our November 1998 cramming complaints. Examples of the stories these consumers told our counselors are attached to this testimony.
Pay-Per-Call Services Category
Of the 244 pay-per-call reports that we examined, 28 percent involved the use of 800 numbers. Those complaints breaks down into three subsets. In 12 percent, consumers were charged for 800 number pay-per-call services that they accessed by calling 800 numbers, even though they had no presubscription agreement. In fact, in most cases the consumers believed that the 800 number calls were free, or that a certain number of minutes were free, based on the advertisements to which they responded.
In another 12 percent, consumers dialed 800 numbers and were either connected to 900 numbers by following instructions to punch additional numbers in on their telephone keypads or by some other means, or instructed to hang up and dial 900 numbers to obtain the advertised services, resulting in 900 number charges. We do not know if preamble messages about 900 number charges were provided in any of the calls, but even if they were, the consumers emphasized in their complaints that they understood the calls would be free or that they would receive a certain number of minutes free. An additional four percent of the 800 number-related complaints were about charges for international or other toll calls that resulted from consumers dialing toll-free numbers.
The remaining pay-per-call complaints broke down as follows. In five percent, consumers were charged for international or other toll calls when they called the numbers without realizing that there would be such charges; when children or others used their telephones without permission to make the calls; or no one could have made the calls.
Twelve percent of the pay-per-call reports involved charges for collect calls. In many instances, the consumers said they never accepted the calls or that no one was home at the time. In some cases, consumers who declined to accept the calls were connected anyway, usually to a recorded message. One consumer was charged for a collect call that was simply a message left on her answering machine. Some of these charges were for domestic long-distance collect calls, others for calls from other countries. When consumers disputed the charges, they were told that they had agreed to be called collect as part of a pay-per-call service to which they had subscribed -- a charge that they denied. One person who accepted a call was led to believe that it was from the fire department. Another thought that it was a friend or family member, but when she accepted the call, there was no sound at all.
35 percent of the consumers who made pay-per-call reports said that they were billed for dialing 900 numbers when they had not or that were misrepresented as free. In some cases, consumers were billed for 900 number charges even though they had 900 number blocking.
In the remaining 20 percent of the pay-per-call complaints that we reviewed, it was unclear whether consumers were charged for 900 number calls, 800 number calls, or other types of calls. All they could tell the NFIC counselors was that they were being billed for adult lines or psychic services or some other type of information or entertainment, but they were not sure exactly how the charges came about or how they were described on their bills. One of the problems with telephone-billed fraud is that many consumers have trouble understanding the different kinds of charges that appear on their phone bills. A chart illustrating the breakdown of the pay-per-call complaints is attached to these comments.
The 62 cramming reports that were made to the NFIC in November of 1998 break down into several categories. Eight percent of the consumers were charged for calling cards that they neither asked for nor received. Thirteen percent of the disputed charges were for long distance services or plans that the consumers never requested or used. Despite the fact that these consumers had not been slammed or used dial-around services, they were charged for long-distance by companies they never heard of in addition to the charges from their regular long-distance carriers.
Eighteen percent of the consumers were billed for voice mail services they did not request. Another 11 percent of the cramming reports were about charges for miscellaneous services -- personal 800 numbers, Internet services, a dating service, a calling card privacy service, and something described as a "value calling service."
In the remaining 50 percent, the consumers could not specify exactly what the unauthorized services were for which they were being billed. Again, consumers are very confused about the charges that appear on their phone bills, which are often described as "monthly service fee" or in similarly vague terms. A chart illustrating the breakdown of these cramming complaints is attached to our comments.
When consumers disputed these charges, they were told that they had signed up for the services by dialing an 800 number or 900 number pay-per-call services such as psychic hotlines, by filling out a form, or by agreeing to the terms of a telemarketing solicitation.
At the root of all the pay-per-call and cramming complaints is this simple fact: all that is needed to place unauthorized charges on a consumer's phone bill is the person's telephone number. Phone numbers can be captured through Automatic Number Identification when someone dials the telephone from the consumer's home or place of business, harvested from contest entry forms, marketing lists and other materials, or obtained directly from the telephone book. It is not necessary for the consumer to actually make a call, though some victims are lured into unwittingly dialing numbers that result in charges. In many cases there is no ability to block the services to prevent such charges.
As a result, consumers have lost control of their telephone bills. If the competitive marketplace for telecommunications services is to flourish and benefit consumers, people must regain control of their telephone bills and the potential for fraud must be eliminated.
Section 1. Questions for Comment on the Proposed Rule
We have already provided statistics from the NFIC for the number and nature of complaints concerning pay-per-call services and telephone cramming. While we cannot comment on the economic cost that industry incurs as a result of fraud or deception in those categories, we can provide information about the costs to consumers. In the 1998 pay-per-call service complaints, the average amount in dispute per person was $197; the average disputed amount in the cramming complaints was $69. Fortunately, many people contact our hotline for advice before they have paid. Nonetheless, some people are intimidated into paying with threats of collection or bad credit.
Questions on Proposed Specific Changes
Before we respond to specific questions that the FTC has posed, we would like to note that "customer" as defined in Section 308.2 (e) generally works well throughout the proposed Rule except in Section 308.4 on advertising disclosures. The word "potential" or "prospective" should be added before "customer" whenever it appears in this section because the consumer has not acquired or been billed for the goods or services at that point.
1. Unauthorized Charges
One of the most important proposed changes in the Rule is the definition of what constitutes a billing error. As we have illustrated, there are many different situations in which consumers are faced with charges on their telephone bills for services they never requested and/or for which they never agreed to pay. But under the current Rule they do not necessarily have the same dispute rights in each instance. Moreover, even when consumers do clearly have dispute rights under the Rule, they sometimes find it difficult to assert them.
Presubscription agreements for 800 number charges are a good example of this problem. Since there is no tangible proof that there is a presubscription agreement between the vendor and the person whose telephone bill will be charged, it is difficult for that consumer to assert that no agreement existed or that the terms were falsely represented. If the new Rule defines the elements of a valid presubscription agreement, billing error should include instances in which consumers contend that those elements were not met.
Consumers should also have the right to assert that there is a billing error if they are billed for information or entertainment services provided through international or other toll numbers. It is unreasonable to expect them to block access to all international phone or other toll numbers in order to protect themselves from those types of charges and unfair to give them less recourse to dispute them than they have with 900 number charges.
We applaud the requirement for "express authorization" under the proposed Rule which will enable consumers to dispute as billing errors charges for voice mail, club memberships and other services they never agreed to purchase. Again, since there is no blocking option that meets the TDDRA criteria, there is no way for consumers to protect themselves from being billed for unauthorized charges of these types. The mere fact that there was a call from a consumer's telephone to a vendor, that someone filled out a contest entry form, or that there was a conversation between a telemarketer and someone at the consumer's number does not constitute an agreement between the person responsible for the telephone bill and the vendor.
Finally, in situations where consumers have taken advantage of their ability to block 900 number access from their telephones, any charges on their bills for 900 number calls must logically fall under the definition of billing error.
2. PIN Number
Fraudulent and deceptive service providers have abused the PIN number in the presubscription provisions of the current Rule in many ways: mailing "activation" numbers to households where anyone might use them; instructing consumers to provide their bank account numbers to verify their identities and then withdrawing charges from their accounts without authorization; or by prompting callers to punch in a code on their telephone keypads in order to obtain the advertised services. Currently there is no assurance when the charges will be assessed to a phone number that the caller is the person who is responsible for the telephone bill at that number, or that the person using the PIN number understands that it will result in charges.
The Commission proposes to remedy this problem by requiring that to be valid the PIN number must be requested by the consumer, provided only to the person who will be billed for the service, and provided simultaneously with a clear and conspicuous disclosure of all terms and conditions associated with the presubscription agreement.
We are not sure exactly how this would work in the absence of a requirement that the presubscription agreement must be signed by the consumer. It is unclear how the vendor would show that the number was requested, or home someone else at the address to which the PIN number was sent would be prevented from using it.
To safeguard the PIN number, we believe that it should be provided to the consumer after the written presubscription agreement has been sent, not simultaneously with it. We suggest the following procedure. Upon receipt of the agreement, the consumer would call an independent third-party that has been retained by the vendor. Using live operators, this company would verify that the person's name matches that on the agreement and that the caller understands the terms. Only at that point would the consumer be issued the PIN number. This would ensure that the PIN number is truly "unique" to the individual.
This process may seem slightly burdensome, but we remind the Commission that the presubscription agreement is intended as a narrowly drawn exemption from the provisions of the Rule and protections that they afford consumers.
3. Presubscription Agreement
We have long advocated for a written agreement signed by the buyer because we believe that contracts for services, especially ongoing services, should be made in such a way that they document clearly and unambiguously the consumer's understanding of and consent to the terms. The Commission has proposed instead to require the vendor to send what is essentially a memorandum of understanding to the consumer who requested the service. We agree that sending the consumer this information would be helpful, but as we noted in our comments on PIN numbers, it is crucial to verify that the person who has access to the service is the person who is authorized to use it, at least when it is first activated. If the consumer is obliged to contact a third-party verifier to affirm the agreement and obtain the PIN number, this process would be a reasonable alternative to the requirement for a signed contract.
4. Service Bureau
We agree that the functions of service bureaus and billing aggregators have broadened over time and that they play key roles in the telecommunications marketplace, not just for audiotext services but for other types of services that may be provided by telephone and/or for which charges may be made to consumers' phone bills. They are the bridges between the vendors, the carriers, and the ultimate consumers. Therefore, they should share responsibility with the service providers for those activities that fall under the provisions and requirements of the Rule. It is also important to include common carriers when they function in the same manner as described for service bureaus.
5. Pay-Per-Call Service
By proposing to include all audio entertainment and information services in the definition of pay-per-call service, regardless of the dialing patterns through which they are provided, the Commission has achieved a simple solution to what has become a complicated problem. As we stated in the public workshop which the Commission convened in June of 1997, it is the service providers who have elected to expand the provision of these types of services to international and other numbers that result in toll charges; situations in which consumers do not receive the same disclosures and do not have the same protection as when dialing patterns are used that fall squarely under the current Rule.
Our concern, and the purpose of the Rule, is to ensure that consumers: know how much they will pay for the service; understand the service that will be provided; are able to control access to services that will result in charges to them; and have the right to dispute charges for such services without fear that their telephones will be disconnected or their credit ruined.
As the old saying goes, "If it looks like a duck and quacks like a duck, it's a duck." The Commission has correctly observed that the essential characteristics of audiotext services are the same, no matter what dialing pattern is used to provide them, and that the impact of fraud and deception on consumers is also the same. What the Commission is essentially saying is, "If it looks like a pay-per-call service and acts like a pay-per-call service, it's a pay-per-call service. We heartily agree.
It is also essential to include in the pay-per-call definition services that are provided as a result of calls to consumers, not just from consumers, since this is one of the ways that unauthorized service charges originate.
6. De Minimus Threshold for Pay-Per-Call Services
The Commission's proposal is reasonable; we certainly would not want to set the threshold any higher. If some dialing patterns provide higher margins of profit than others but would fall under provisions and requirements of the Rule, it is up to the vendors to weigh the costs and benefits and determine what types of lines they wish to use to provide their services.
7. Rebuttable Presumption of Payment
We agree that it is fair to assume that the services are not being provided without some renumeration being generated for the company that provides them. Therefore, it should be up to vendor to rebut this presumption if that is not the case.
8. Misrepresentation of Cost
The proposed provision concerning misrepresentation of cost addresses some of the most egregious problems that we hear about concerning pay-per-call services. Many of the complaints that the NFIC receives are from consumers who called 900 number psychic hotlines and other pay-per-call services in response to advertisements that misled them to believe that the first call, or a portion of the call, was free. Others were connected or directed from a "free" 800 number to a 900 number with the same understanding. In some instances, consumers were left on hold for long periods of time but were falsely led to believe that those minutes did not count towards their "free" time.
Service providers should clearly be prohibited from misrepresenting the costs of their services. Moreover, to ensure that consumers understand when their free time is up, the Commission has proposed a solution that we have advocated previously, to require a signal when the "free" time is ending. It is unreasonable to expect consumers to stare at their clocks and keep track of the time while they are obtaining information or enjoying entertainment services. Furthermore, the potential for disputed bills would be reduced if consumers were alerted to the fact that charges are about to start. The same rationale for the required signal at the end of the free preamble message applies here.
9. Beepers and Pagers
The NFIC receives complaints from consumers who incurred charges for pay-per-call services as a result of responding to a beeper or a pager. Even though consumers may not always recognize the number, they are likely to respond because they naturally assume that there is an emergency or the message is from someone they know.
Because we believe that most people use beepers and pagers for personal and business communication or for emergencies, and do not expect to receive messages on them from strangers, we think it is highly inappropriate to solicit consumers for information or entertainment services through those devices. The Rule should simply prohibit this practice.
10. Nominal Cost Calls
We see no compelling reason to raise the threshold from $2 to $3. The preamble message provides important information to consumers about the services that will be provided and the cost. One call may result in nominal charges, but it is not uncommon for consumers or others in their households to make repeated calls within one billing period. Without the service and cost information, there is no way to ensure that callers understand what they are getting and what the service costs -- until the bill arrives weeks later. Therefore, we do not support raising the threshold and, correspondingly, the number of services that can be accessed without the preamble message and the important information it conveys.
11. Fractional Minute Billing
While we have no expertise in billing technology, we agree that it seems unfair to continue to assess consumers for time-based services after they have disconnected from the calls. If billing in less than one minute increments is now technically feasible, the rule should be changed as the Commission has proposed. As an alternative, the vendor could be required to disclose in its advertisements and in the preamble message if it rounds up the charge to the next minute.
12. Toll Charges
There is no benefit to consumers in accessing information and entertainment services through numbers that result in toll charges. The drawbacks for consumers, however, are significant. Since the charges differ widely depending on consumers' long-distance calling plans, there is no way for the service providers to inform them in advance how much the services will cost. Furthermore, since it is not feasible for consumers to block access to long-distance services, there is no way for them to prevent household members or others from making unauthorized calls for information or entertainment services that will result in toll charges on their bills. Billing disputes about toll charges also cause major problems for local and long-distance carriers, who have no way of distinguishing toll calls that are used to access pay-per-call services from other toll calls.
In proposing to prohibit audiotext services from being billed as toll charges, the Commission has taken the only logical and sensible course of action. Again, we remind the Commission that service providers have other options. The Rule is not intended to guaranty service providers the lowest cost or highest margin of profit. Rather, its purpose is to ensure that consumers understand what services will be provided and how much they will cost, and to give them reasonable dispute rights for erroneous or unauthorized charges. There are no less restrictive means to achieve that purpose.
13. Express Authorization
Express authorization is vital to the integrity of the telephone billing system, but that integrity has been severely compromised. In 1997 only 19 percent of the payments that consumers reported to the NFIC in connection with telemarketing fraud were made via their phone bills; within a year that figure rose to 43 percent. The root of the problem is the fact that anyone selling audiotext or other services can arrange with a billing system operator to charge the person who is responsible for the account at a specific telephone number, without any proof that the person agreed to buy the services.
As a result, two equally troubling scenarios are possible. One is that the person who is responsible for the bill to that telephone account is not the same as the person who requested the service. The other is that no one has requested the service and the charges are simply fictitious. The NFIC hears from consumers about both scenarios. The burden is often placed on the consumers to show that the services were not authorized; a difficult burden to meet when no documentation of the agreement to purchase the services is required.
We agree with the Commission that ANI cannot be used to document a telephone-billed purchase. It does not show who made the call or what the understanding was between the parties. However, we are troubled by taped authorization because the NFIC has received many complaints from consumers about both slamming and cramming in which they contend that a taped conversation was altered to use a "yes" answer to a question unrelated to purchase as proof that they agreed to do so. In some instances the taped voice was not even that of the consumer or anyone else in the household.
We also hear from consumers who say that as a result of someone filling out a contest entry form, coupon promotion or other materials, they were signed up for telephone-billed services without their knowledge or consent.
We believe that all non-blockable telephone-billed purchases covered by the proposed Rule should be verified by independent third parties because it would be the most effective method of confirming express authorization. This verification process could be conducted by the consumer's local phone company or another entity contracted by the service provider for that purpose. Furthermore, we suggest that the Rule prohibit contest entry forms, checks and coupons from being used to obtain express authorization for telephone-billed services.
14. Billing Statement Disclosures
For any telephone-billed purchases covered by the Rule, consumers' bills should show the name and local or toll-free number of the entity that has the responsibility and authority to answer questions and resolve complaints concerning those charges. In addition, the address of that entity should be included in case consumers have difficulty getting through to busy lines and wish to make their complaints in writing, or want to follow up a telephone conversation in writing.
We strongly disagree, however, that it is unnecessary to include the vendor's name on the bill. Billing aggregators, service bureaus and billing entities typically contract with many different vendors simultaneously. Consumers have the right to know whose services they are being billed for without having to make a call to find out. Furthermore, both the local telephone companies, as operators of the billing systems, and law enforcement agencies need to know the identity of the vendors in order to detect patterns of abuse. The vendor's name could easily be added to the bills after the information about how to reach the inquiry/complaint handling entity.
15. Service Bureau Liability
The Commission's proposals for direct service bureau liability seem sensible and fair in light of the direct roles they play in facilitating telephone-billed transactions.
16. Billing Entity Liability
We believe that liability on the part of the billing entity is necessary to eliminate the run-arounds and unresponsiveness that consumers frequently encounter when they question telephone-billed charges. For example, one woman who complained to the NFIC about cramming said that when she got no satisfaction from the first person she spoke to at the number listed on her phone bill and insisted on speaking to a supervisor, another person came on the line and abruptly told her that she had to hang up because "the building was on fire." In many instances, consumers are put on hold for interminable lengths of time or just get busy signals.
The Commission proposes to impose liability broadly. In the definitions, a billing entity is anyone who transmits the billing statement or assumes responsibility for receiving and responding to billing error complaints and inquiries. Thus, the billing entity could be a vendor, a service bureau or billing aggregator, a local telephone company, or there could be multiple billing entities involved in the same transaction.
We believe that it is appropriate for liability to be shared as the Commission has proposed. Over the past several months, many of the local telephone companies themselves have acknowledged their responsibilities to consumers, particularly in cramming complaints. They have begun to examine their internal systems to improve screening of vendors, service bureaus and billing aggregators who seek their services. They have set criteria for terminating billing relationships with companies about that have generated unacceptable levels of complaints or violated other provisions of their contracts. In addition, they are improving their own handling of consumer complaints.
Billing aggregators have also worked together to develop voluntary guidelines of conduct in regard to cramming. These efforts are voluntary and not uniform. We would hope that the liability proposed by the Commission would give even more momentum to this process and provide guidance for developing standards of conduct in the industry.
However, we do have some concerns about how this shared liability would work in regard to the billing error procedures. We will discuss this issue further in our answers to Question 20.
17., 18. and 19. We have no opinions on these questions for the industry.
20. Reasonable Investigation
We will use this section of our comments to focus not only on the issue of reasonable investigation but on other aspects of the proposed dispute resolution procedure. Many of the consumers who contact the NFIC are confused about how to resolve disputes concerning telephone-billed purchases, especially since so many different entities may be involved. Some, out of fear that their telephone service will be disconnected or that their credit will be ruined, have already paid the charges even though they believe that the services were unauthorized or misrepresented. Many consumers complain that they were threatened or intimidated. The "proof" that they are given when they question authorization for the services is sometimes fabricated, or no documentation is provided at all.
We believe that the dispute procedure must be easy for consumers to follow, that the burden of the proof must rest with the vendor to show that services were authorized, and that consumers must be protected from inappropriate collection activities.
One point of potential confusion for consumers is exactly who they should notify about billing errors. In the background information about the proposed dispute resolution procedures, the Commission notes that the billing entity will usually be the local telephone company. But under the proposed definitions, other parties may also be considered billing entities, depending on their functions. The Commission proposes that where there are multiple billing entities, the parties must decide which of them is responsible for receiving and responding to billing errors. Thus, it is possible that the entity consumers would notify under Section 308.20 could be a vendor, a service bureau or a billing aggregator, not the local telephone company.
This scenario raises serious concerns. First, if the dispute is being investigated by another billing entity, the local telephone company may be unaware that the consumer intends to withhold payment for the charges in question. It is also important for the local telephone company to know about possible problems with vendors and others with whom it has contractual relationships.
Second, if the entity that the consumer notifies about the billing error does not fulfill its responsibility to investigate it, the clock continues to tick. How would the consumer prove that the billing entity was notified within the 60-day time limit if that entity denied it later?
One obvious solution to these problems would be to require the billing entity responsible for handling billing errors to notify all other billing entities of the dispute, but this would place too much reliance on an entity that may be fraudulent. Or the billing disclosures could instruct the consumer to file notice of an error with both the entity listed on the bill for that purpose and the local telephone company, if they are not one and the same. But this would place more burden on consumers than may be appropriate.
The most simple and reliable procedure would be to require the entity that transmits the bill to the customer be the point of contact for billing errors. That entity would have the responsibility to transmit the information upstream to either the vendor or an agent for the vendor, depending on how those relationships are arranged, and to transmit the response back to the consumer. All of the entities involved would still share liability for compliance with the provisions of the Rule.
This standardized procedure would also make it easier to educate consumers about how to deal with disputes concerning telephone-billed purchases. It places a burden on the local telephone companies, but it is a burden that they already shoulder, since many consumers contact their local telephone companies when they find unauthorized charges on their bills, even if their bills instruct them to contact another entity. The costs associated with these functions can be built into the contracts between the local telephone companies and the vendors or their agents.
Moreover, this procedure would ensure that all parties are made aware of the billing dispute and that collection activities are halted pending investigation, an important provision of the proposed Rule. To clarify how the process works, a definition for "primary billing entity" would be required.
We strongly support other provisions of this section concerning the consumer's ability to withhold payment for disputed charges, the requirement to provide documentation of disputed charges that are deemed valid, and the limits on relaying information about disputed charges to credit reporting agencies. They are vital to protect consumers from abusive collection practices.
However, we are not sure that the 60-day time limit for disputing charges will adequately protect consumers from liability to pay unauthorized charges that are "crammed" onto their phone bills. Many of these charges are relatively small, ranging between $3.95 and $19.95, so they are not always noticed by consumers right away. The fact that the disputed amount per person for cramming complaint averaged $69 last year indicates that it may be several months before consumers realize that these fraudulent charges have been added to their bills. Therefore, we believe that the dispute period should run from the time that the consumer first discovers the problem or from the most recent bill on which the charge appeared.
21. Evidence of Debt
The fact that telephone-billed purchases have been delivered does not prove that they were made by the person who receives the bill, especially if the evidence is simply based on ANI. The NFIC receives complaints from consumers who have been charged for unsolicited calling cards, collect calls that they never accepted, or 900 number calls they never made. In any investigation of a dispute, proof of delivery is one factor to look at but it is not necessarily determinative of whether the debt is valid, particularly for non-blockable services or in instances where a block was requested but failed to stop the charges from being put through for payment.
22. TDDRA Blocking
Some consumers complain that they have been charged for 900 number calls even though they requested blocks from their local telephone companies. We know from discussions with industry members that it is possible to forward fictitious transaction reports to the local telephone companies for billing and collection. Thus it is very important for the local exchanges to keep accurate records of when TDDRA blocking has been put into place and to make those records easily available to the consumer, law enforcement agencies, and the other entities involved in a billing error dispute concerning charges for services that were supposedly blocked.
23. Applicability of Third-Party Debt Collectors
Third-party debt collectors should stand in the same shoes as the vendor and other entities involved in a telephone-billed transaction in terms of their responsibilities to consumers to investigate billing errors and to cease collection activities.
We appreciate the care and thoroughness with which the Commission staff has examined problems with the sale of audiotext services and abuses in the telephone billing system. This review has been a long process and we hope that it will not be necessary to revisit the Rule again for several years. That is why we urge the Commission to take the strongest possible action now. Thank you very much for considering our views and suggestions. For further information about our stance on these issues, please do not hesitate to contact me at (202) 835-3323.
Susan Grant, Vice President for Public Policy
National Consumers League
1701 K Street NW, Suite 1200
Washington, DC 20006
Examples of Telephone-billed Fraud reported to the National Fraud Information Center
California woman responded to TV commercial for free psychic reading, called the 800 number and was told repeatedly there would be no charge. Subsequently charged on phone bills for $10 monthly membership fee.
California man reported that a collection agency was dunning mother for 800 number calls made a year after she died.
California man responded to pager message to call 888 number. Got recording, put on hold for 4 minutes and hung up, later received $45 bill for call.
Michigan man received bills totaling $386 for 800 number calls never made. Called company listed on bill, got recorded message saying that there would be $5 per minute to dispute charges.
South Carolina woman called 800 number for free psychic reading, was given 900 number to call and told first 3 minutes was free and to hang up when she heard a tone. Followed instructions but was billed for the 3 minutes.
Mississippi woman called 800 number for psychic reading but was charged for 900 number call. Company insisted she dialed 900 number, said it was impossible for them to charge her for 900 number call if she didn't.
Washington woman's underage son called 800 number listed on web site, but call was rerouted to number in Guyana. Long distance company said she had to pay or lose her service.
North Carolina woman's 13 year-old daughter called 800 number listed in magazine ad for music hotline. Switched to international number, resulting in $1,200 phone bill.
New Hampshire woman received charges for 4 calls to Toronto that were made when she was in Florida and no one else had access to her home.
Arizona woman billed for international calls to sex line. Called company listed on bill to dispute, transferred to supervisor who mocked her and then announced building was on fire and hung up.
California man received fax at his small business requesting information about services. Number to respond to was 900 number that would result in $35 charge.
Massachusetts couple received bill for 900 number calls made when they were away on business in different towns and no one else had access to their home. Local phone company removed charges but now vendor seeking payment through collection agency.
Massachusetts woman who had 900 block on phone received bill for 900 calls never made.
Alabama man called 900 number and agreed for charges to be debited from bank account. But 3 months later account was debited again even though no more calls were made.
North Carolina man received bill for 900 number calls never made. Called company listed on bill to dispute, played him tape of stranger.
New York woman received bill for 900 number calls supposedly made in November from number she no longer had, which had been disconnected the previous July.
New York man called 900 number for free psychic reading, was put on hold for 55 minutes and finally hung up. Received bill for $394.
Maine woman called 900 number psychic hotline, left on hold for 45 minutes and hung up. Was charged for call, which company agreed to remove, but later billed for monthly fee for services never requested.
Illinois man charged for 3 19-minute collect calls from Florida from adult entertainment provider. No one in house accepted calls.
Delaware consumer charged for collect calls from England made at times when he not even home.
Massachusetts woman received calls with no voice. Later received bill for collect calls from Florida made that same date.
Florida woman received collect call on answering machine, charged $4 even though never accepted.
California woman received collect call from someone claiming to be from fire department about an emergency. She accepted but no one there, was charged $21 for call.
New York woman received collect call from a "Jennifer," she accepted but got recording about children's rights. Later received letter saying that there would be $8 charge on next phone bill.
North Carolina man charged $20 per month on phone bill for Internet services never requested. He doesn't even have a computer.
New York woman being billed for "calling card privacy protection" she never authorized.
New York woman charged for voice mail never requested. Local phone company removed disputed charge from bill but vendor billed for it again the next month.
North Carolina woman receiving $10 month charge for long distance service from company she never heard of, still has original long-distance carrier.
Wisconsin man received calling card never requested. He destroyed it and called company to cancel, but is being billed for calling card anyway.