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
Dear Sir:
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.
Sincerely yours,
Susan Grant
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
Introduction
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.
Cramming Category
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
General Questions
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.
Conclusion
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.
Respectfully submitted,
For more information, write the National Consumers League at 1701 K Street, N. W., Suite 1200, Washington, DC 20006; 202-835-3323.
The National Consumers League, founded in 1899, is America's pioneer consumer organization. NCL's three-pronged approach of research, education and advocacy has made it an effective representative and source of information for consumers and workers. NCL is a private, nonprofit organization representing the consumer on marketplace and workplace issues.