Pay-Per-Call Rule Review: 900 Number #3

Submission Number:
Richard Blumenthal
National Association of Attorneys General
Initiative Name:
Pay-Per-Call Rule Review: 900 Number


In the Matter of:
FTC File Number R611016

900-Number Rule Review -- Comment


The Telecommunications Subcommittee of the Consumer Protection Committee of the National Association of Attorneys General and the Attorneys General of the States of Arizona, Arkansas, California, Connecticut, Delaware, Florida, Idaho, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Minnesota, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Vermont, Washington, West Virginia and Wisconsin ("Attorneys General") file these comments in response to the Federal Trade Commission's ("Commission") request for comments regarding the review of the 900-Number Rule ("Rule") and expansion of the definition of pay-per-call services to cover all services that are susceptible to unfair and abusive practices.

The Attorneys General receive complaints about fraudulent pay-per-call services using international numbers, toll free numbers, collect calls, instant calling cards and other dialing patterns. Pay-per-call providers use these alternative methods to evade federal protections established to stop fraud and abuse by services that used 900 numbers. As a consequence, consumer safeguards such as 900 number blocking, disclosure requirements, and dispute resolution procedures are ineffective; consumers remain at risk of disconnection of basic local telephone service for refusal to pay unexpected or fraudulent pay-per-call services accessed through these alternative dialing patterns.(1)

The 900 Number Rule was intended to remedy widespread fraud and abuse that characterized the emergence of pay-per-call services during the late 1980s. At that time, pay-per-call providers used 900 numbers to recycle well-worn consumer frauds such as deceptive credit, employment and prize offers, or other bogus services. The Attorneys General supported efforts to stop flagrant fraudulent schemes that extracted millions of dollars from legitimate businesses and unsuspecting consumers.(2) This Rule together with other federal and state regulatory measures, law enforcement efforts and telecommunications industry responses made a difference in the pay-per-call industry.

Today, a wide variety of pay-per-call services are available through 900 numbers. Existing regulatory measures place minimal burdens on legitimate pay-per-call services but prohibit unfair and abusive practices and ensure that consumers have necessary information to make informed choices.

Unlike the late 1980s, recent consumer complaints about pay-per-call services are not limited to 900 number programs. In an obvious attempt to evade regulatory measures, unscrupulous promoters now offer pay-per-call services without using 900 numbers or by exploiting other regulatory loopholes.

The persistence of fraudulent and abusive practices also undermines the development of the legitimate pay-per-call industry. According to an industry trade journal, forty percent of charges for calls to 800 and 900 number services were reported to be unpaid.(3) This level of unpaid bills is not characteristic of a stable and mature marketplace.

The Attorneys General support expanding the Rule's pay-per-call definition and strengthening other provisions consistent with the Telephone Disclosure and Dispute Resolution Act ("TDDRA")(4) and Section 701 of the Telecommunications Act of 1996 ("1996 Act").(5) We urge the Commission to take necessary action to achieve Congress' intent to close regulatory loopholes and halt abusive practices in the pay-per-call industry.


Despite more than six years of legislative and law enforcement efforts, pay-per-call fraud and abuse remain a significant problem for consumers. Consumer complaints describing telephone bills with unexpected, exorbitant pay-per-call charges are regularly filed with state enforcement and regulatory agencies.(6) The Federal Communications Commission (FCC) reports that there is a significant level of consumer complaints about pay-per-call services to the FCC's National Call Center.(7) Both federal and state enforcement resources continue to be directed at egregious unlawful practices.(8) Specific examples include the following:

  • False and misleading advertising and marketing tactics. Complaints describe various schemes such as employment offers in classified sections of local newspapers which invite persons interested in part-time positions paying $9.00 per hour to call an international number for more information. Instead of employment, callers are billed about $20 for a prerecorded message that solicits the sale of printed materials (App. 102,103,119,118).

  • Fraudulent schemes that trick persons to accept collect calls or call undisclosed pay-per-call services. Telemarketing ruses about purported merchandise orders or offering a prize are used to entice recipients to accept collect calls or place calls to international numbers and unknowingly incur exorbitant charges (App. 104-108).

  • Unordered "membership" or "subscription" charges for pay-per-call services. Pay-per-call providers offering services such as psychic advice, advertised to be available by calling toll free numbers, impose unrequested monthly "membership charges" (App. 108-113).

  • Unauthorized charges for calls to pay-per-call services. Subscriber complaints dispute validity of pay-per-call charges for calls purportedly made to 900 and other numbers (App. 115-116). Subscribers frequently are unable to obtain information about the provider to pursue dispute procedures (App. 114-115).

  • Misleading or insufficient information on pay-per-call charges included on telephone bills. Pay-per-call services are billed as "voice mail", "conference calls" or other type of telecommunications service (App. 113).

  • Abusive collection practices. The direct or implicit threat of disconnection of basic local telephone service and other onerous tactics are used by pay-per-call providers to obtain payment of disputed charges (App. 105, 115).


The pay-per-call industry is marked by a troubling pattern of consumer fraud. Past regulatory and legislative efforts to stop pay-per-call fraud and abuse, although beneficial, were limited in scope. In 1991, the FCC first established rules to protect telephone subscribers from pay-per-call abuses.(9) Congress then enacted TDDRA to curb continued deceptive and unfair practices, while still fostering the legitimate pay-per-call industry's growth. Following TDDRA, the FCC and this Commission formulated rules to implement the TDDRA's protections for consumers.(10)

Unfortunately, TDDRA and agency regulations did not stop pay-per-call fraud and abuse. After 900 safeguards were in place, unscrupulous providers migrated to toll free numbers. Following heightened scrutiny of 800 numbers by enforcement authorities and a rule making proposal by the FCC in 1994(11), providers found still new ways to deceive unwary consumers. In the latest cycle of abuse, providers, acting in concert with cooperative carriers and foreign telephone companies, furnish pay-per-call services from foreign locations at exorbitant rates. In response, last year Congress amended TDDRA to address providers' circumvention of the law.(12)


In the 1996 Act, Congress revised TDDRA's provisions regarding toll free numbers to require that presubscription agreements be in writing. Also, the exclusion of services which were tariffed was eliminated. Furthermore, the 1996 Act expressly authorized this Commission to extend the pay-per-call definition to other services "susceptible" to similar unfair and deceptive practices.

The Conference Report states that the 1996 Act was intended to "close a loophole in current law, which permits information providers to evade the restrictions of . . . [TDDRA] by filing tariffs for the provision of pay-per-call."(13) The Report emphasizes Congressional intent that pay-per-call charges appear on a phone bill only if a customer knowingly ordered such services. In view of this history of pay-per-call fraud, Congressional concern about potential rule evasion is well-founded.


The 900-Number Rule, in its present form, is of limited use to law enforcers. Rather than attempting to enforce the Rule, many states have resorted to enforcement actions under state unfair and deceptive practices acts.(14) There have also been legislative and regulatory responses to pay-per-call fraud and abuse on the state level.(15) Likewise, the Commission has based enforcement actions on § 5 of the FTC Act to curb similar telecommunications service abuses.(16)

The Rule's current definition of pay-per-call services in section 308.2 is inadequate in two respects. First, the definition is limited to calls accessed via a 900 number prefix (sec. 288(i)(1)(c)). This limitation has enabled some providers to promote pay-per-call services identical in all relevant respects to 900 number services, but without disclosing cost and otherwise complying with the Rule. As recognized in the Conference Report, use of 800, 500, 700 and 10XXX and other access mechanisms have enabled providers to avoid the requirements of the current Rule.(17) Not surprisingly, as had been the case with 900 services, these alternative services have been the source of consumer complaints alleging unexpected, exorbitant charges.

Second, as Congress recognized, the exclusion of "any service the charge for which is tariffed" also permitted providers to circumvent federal protections.(18) The 1996 Act's elimination of this exception will stop evasion by including exorbitant pay-per-call charges in carrier tariffs.(19) As a result of this change, the Rule's application will turn upon the type of conduct, not the status of a tariff or provider. Status exemptions of this sort look back to a past era of comprehensive regulation, but have no place in the emerging competitive telecommunications marketplace. Deregulation does not mean that telecommunications service providers are free to engage in fraudulent or abusive practices.

The Attorneys General believe that extending the regulatory definition to cover not just those services reached by a 900 number but also similar pay-per-call services however accessed is essential. This artificial distinction should be eliminated. Although this industry is difficult to define, two salient characteristics are that the purported sale of goods or services is accomplished by completing a telephone call to a particular telephone number and payment is combined with the cost of the transmission of the telephone call. If the definition of pay-per-call services is extended to include all such services, abusive and fraudulent practices will diminish significantly.

The proposed extension of the definition of "pay-per-call services" will serve Congressional intent to protect legitimate pay-per-call services that provide full, accurate disclosures. Consumers will be better equipped to distinguish legitimate from fraudulent services and will be better protected if they are subjected to unlawful pay-per-call charges.

We strongly recommend that the Commission extend the pay-per-call definition to include all services susceptible to unfair and deceptive practices by modifying 47 U.S.C. § 228 to provide as follows:(20)

(1) The term "pay-per-call services" means any service--

(A) in which any person provides or purports to provide--

(i) information or entertainment produced or packaged by such person;

(ii) access to simultaneous voice conversation services; or

(iii) any service, including the provision of a product, the charges for which are assessed on the basis of the completion of the call;

(B) for which [the caller pays] THERE IS a per-call or per-time-interval charge that is greater than, [or] in addition to, OR INCLUDED WITH the charge for transmission of the call; and

(2) Such term does not include directory services provided by a common carrier or its affiliate or by a local exchange carrier or its affiliate, or any service for which users are assessed charges only after entering into a presubscription or comparable arrangement with the provider of such service.

Also, the Commission should implement other modifications consistent with these principles. For example, revision of the name of the Rule would reflect its applicability to all pay-per-call services. Further, the definition of service bureau in sec. 308.2(i) should be revised to eliminate an automatic exemption for common carriers that perform such functions.(21)


The Attorneys General believe that the pattern of consumer abuse requires additional measures to protect the public from mistreatment and to ensure integrity in the market place. We encourage the Commission to put into place the following protections to prevent fraudulent and abusive practices and continued problems in the pay-per-call industry.

1. The Rule should require that all presubscription or comparable agreements be documented in writing and sent to the party to be billed. The 1996 Act provides that presubscription agreements must be in writing as a precondition for billing for pay-per-call services obtained by calling toll-free numbers. This provision is consistent with recommendations that the Attorneys General have made previously. Although the 1996 Act and the FCC's regulations imply that consumers would receive a copy of a presubscription agreement, the Rule should expressly obligate pay-per-call providers to send a copy to the party to be billed. The copy could be transmitted by mail or by electronic medium, but oral transmission should be precluded.

The Attorneys General have received numerous complaints from consumers who were billed for pay-per-call services that were contracted by and provided to third parties. Telephone subscribers should not be billed for pay-per-call services provided to another person unless the subscriber has agreed to assume responsibility. Without notice that would be provided by sending the subscriber a copy of such agreement, scam operators are likely to find a way to "document in writing" an agreement which is unknown to the subscriber who is billed.

2. Advertisements and other marketing activities which promote pay-per-call services must include disclosures and otherwise comply with requirements of the Rule. The Commission should indicate expressly that any advertisement which has the purpose or effect of inviting the public to purchase pay-per-call services must include required disclosures. Section 308.3(i) should be revised to prohibit in pay-per-call advertisements reference to international or in other numbers (in addition to toll-free numbers) unless required disclosures are made. Moreover, sec. 308.5(i) regarding prohibitions related to toll-free numbers should be expanded to include circumstances where the calling party is solicited to call a pay-per-call service as a result of a call to a toll free number.

3. The imposition of recurring monthly charges for pay-per-call services should be prohibited in the absence of a written presubscription agreement. In addition to a charge for a call to a pay-per-call service, as indicated by numerous complaints, some unscrupulous providers impose small monthly "membership" charges on the basis of a single call. These small, recurring charges may go unnoticed for months. Not only do consumers dispute responsibility for the initial call, but also object to reoccurring monthly charges. The practice of misrepresenting subscription charges should be specifically prohibited by the Rule; reoccurring monthly charges should be prohibited unless based on a valid presubscription agreement.

4. Parties that bill and collect for pay-per-call services must make information about provider identity and other relevant data easily available to subscribers. Complaints indicate that charges for pay-per-call services are referenced as "voice mail" or "conference call", but not as pay-per-call services. This practice misleads and confuses subscribers. Further, complaints document the inability of subscribers to obtain information about exorbitant pay-per-call charges. Section 308.5(j) should be expanded to obligate pay-per-call providers and any third party billing on behalf of such companies, to have such information readily available for consumers.

In the past, the Attorneys General recommended that a pay-per-call provider's name be included on the bill. We continue to support this approach. The Rule should obligate both pay-per-call services and third parties billing for such services to make this information readily available to subscribers.


In view of past and current problems, as well as the potential for continued fraud and abuse, unauthorized charges, and consumer confusion, we urge the Commission to implement additional safeguards designed to protect consumers against these practices. If strong measures are not adopted, fraudulent and abusive practices will continue to compromise the growth of the legitimate pay-per-call industry, and undermine the policies of federal and state laws intended to stop these practices.

Dated this 9th day of May, 1997.

Respectfully submitted,

Attorney General
State of Connecticut
Chairperson, Telecommunications Subcommittee
Consumer Protection Committee
National Association of Attorneys General

The following Attorneys General join in these comments:

Attorney General
State of Arizona

Attorney General
State of California

Attorney General
State of Florida

Attorney General
State of Illinois

Attorney General
State of Iowa

Attorney General
State of Maryland

Attorney General
State of Minnesota

Attorney General
State of New Jersey

Attorney General
State of New York

Attorney General
State of Ohio

Attorney General
State of Rhode Island

Attorney General
State of Vermont

Attorney General
State of West Virginia

Attorney General
State of Missouri

Attorney General
State of Arkansas

Attorney General
State of Delaware

Attorney General
State of Idaho

Attorney General
State of Indiana

Attorney General
State of Kansas

Attorney General
State of Michigan

Attorney General
State of Nevada

Attorney General
State of New Mexico

Attorney General
State of North Carolina

Attorney General
Commonwealth of Pennsylvania

Chief Deputy Attorney General
State of Tennessee

Attorney General
State of Washington

Attorney General
State of Wisconsin

1. Included in the appendix are examples of complaints involving alternative dialing patterns that Attorneys General have recently received (App.102 - 114). Recent complaints about pay-per-call services using 900 numbers are included as well (App. 115-116). These complaints as well as past enforcement efforts demonstrate the need for a comprehensive approach pay-per-call fraud and abuse.

2. Comments and Recommendations of the Telecommunications Subcommittee of the Consumer Protection Committee of the National Association of Attorneys General, In the Matter of Proposed Telephone Disclosure Rule, FTC File No. R311001 (April 7, 1993).

3. "To Catch a Thief: Bell Atlantic Calls for Unity on Phone Fraud, Lucent Sets up Wireless Network Effort," Communications Billing Reports, p. 3 (March 11, 1997). An explanation for such an exorbitant level of unpaid charges is that subscribers did not knowingly seek to acquire such services and are withholding payment.

4. Telephone Disclosure and Dispute Resolution Act of 1992, Pub. L. No. 102-556, 106 Stat. 4181 (1992), 15 U.S.C. § 5701, et seq.

5. Telecommunications Act of 1996, § 701, Pub. L. No. 104-104, 110 Stat. 56 (1996), 47 U.S.C. § 151, et seq.

6. Records maintained by the Ohio Attorney General's Consumer Protection Section indicate that complaints about pay-per-call services are increasing (App. 101).

7. The FCC reported 700 inquiries or complaints as of December 5, 1996 (

8. See, for example, State of Missouri v. Top Communications, Inc., Greene County Circuit Court Case No. 195 CC 3968 (1995)(deceptive work at home offer accessed by 809 area code; preliminary injunction entered July 5, 1996) (App. 116); State of Wisconsin v. Top Communications, Inc., et al., Monroe County Circuit Court Case No. 95-CV-200 (1995)(deceptive work at home offer accessed by 809 area code) (App. 117); Commonwealth of Massachusetts v. InfoAccess, Inc., Suffolk Superior Court Case No. 96-5798-E (1996)(assurance of discontinuance regarding 800 pay-per-call services) (App. 119); In the Matter of Long Distance Billing Company, Inc., State of Idaho, Ada County Case No. CV OC 9502249D (1995) (assurance of discontinuance regarding deceptive pay-per-call billing practices)(App. 120); Federal Trade Commission, et. al., v. Mercantile Messaging, L.L.C.,, U.S.D.C. Civil Action No. 3-96-CV-80200 (S.D.Ia.) (deceptive travel offer to induce calls to an international number); In the Matter of Telephone Publishing Corporation and Telemedia Network, Inc., d/b/a International Telnet, Notice of Apparent Liability for Forfeiture, FCC File No. ENF-97-02, DA 97-809 (April 18, 1997) (forfeiture of $49,000 for apparently providing pay-per-call services through 800 access numbers).

9. Policies and Rules Concerning Interstate 900 Telecommunications Services, CC Docket No. 91-65, Report and Order, 6 FCC Rcd 61166 (1991), recon., 8 FCC Rcd 2343 (1993).

10. Policies and Rules Implementing the Telephone Disclosure and Dispute Resolution Act, CC Docket No. 93-22, Report and Order, 9 FCC Rcd. 2475 (1993); 47 C.F.R. § 64.1501, et seq.; § 308, Statement of Basis and Purposes and Final Rule, 58 F.R. 42, 364 (August 9, 1993), 16 C.F.R. § 308.1 et seq.

11. Policies and rules implementing the Telephone Disclosure and Dispute Resolution Act, CC Docket No. 93-22, Order on Reconsideration and Further Notice of Proposed Rule Making, 9 FCC Rcd 6891 (1994).

12. Last fall, the FCC amended its pay-per-call rules to conform to changes required by the 1996 Act. The FCC also proposed additional measures to safeguard consumers. See Policies and Rules Governing Interstate Pay-per-call and Other Information Services Pursuant to the Telecommunications Act of 1996, CC Docket No. 96-146, Order and Notice of Proposed Rulemaking, 11 FCC Rcd. 14, 738 (1996).

13. H. Conf. Rpt. No. 104-458, p. 203, 104th Cong., 2d Sess. (1996).

14. See note 7, supra.

15. Perhaps the most innovative approach is reflected in recent amendments to Idaho's Pay-Per-Telephone Act (App. 121). These amendments adopt a "statute of frauds" approach to address disputes about adult entertainment pay-per-call services and require that such transactions be evidenced in writing. Title 48, ch. 11, Idaho Code.

16. Federal Trade Commission, et. al., v. Mercantile Messaging, L.L.C.,, U.S.D.C. Civil Action No. 3-96-CV-80200 (S.D.Ia. 1996) (deceptive travel offer to induce calls to an international number).

17. Conference Report at 203.

18. See Commonwealth of Massachusetts v. Info Access, Inc., et al., U.S.D.C. Civil Action No. 94-1209 (JLT) (D. Mass.) (carrier providing pay-per-call service at tariffed rates charged with violating the 900 Number Rule).

19. Section 308.2(c) defines pay-per-call service by reference to 47 U.S.C. § 228; however, note 1 of Section 308.2(c) sets out the terms of the statute prior to amendment and must be revised.

20. Additions are capitalized and deletions are bracketed.

21. Zekman v. Direct American Marketers, Inc., 286 Ill. App. 3rd 462 (1997).