V. Basic Approach: Deterrence Through Accountability

These interim rules, if implemented consistently, should block most cramming attempts before subscribers are harmed. If crams do occur, the rules provide a relatively simple, fair, and effective process for getting unauthorized charges removed and other billing errors corrected.

Some carriers, particularly wireless carriers, in their comments on the first draft of these rules, argued that the Commission should abstain from adopting any rules on non-communications charges until after it has seen what problems develop. This in essence is a recommendation to "wait and see what fraud happens," an approach we reject as irresponsible.

The Legislature has directed the Commission to adopt billing safeguards before telephone bills are opened up to non-communications products and services, and for good reason. The Commission continues to receive many complaints involving slamming, cramming, billing errors on telephone bills, misleading advertising, undisclosed charges, change of terms and conditions without notice, etc. Hundreds of consumers spoke at public participation hearings last summer of long and frustrating hours spent trying to correct crams, slams, and billing errors, of carriers that did not terminate service and billing despite repeated requests, and of loss of telephone service and damaged credit stemming from unresolved billing problems. Hundreds more consumers described similar problems in letters and electronic messages to the Commission, and urged the Commission to adopt effective safeguards. And as the Attorney General has argued persuasively in his opening and reply comments to the first draft of these rules, opening up telephone bills to non-communications charges without effective safeguards in place would place telephone subscribers at an increased risk of falling victim to fraud crimes such as credit card fraud, e-commerce fraud, and credit identity theft, which currently pose challenges for law enforcement agencies. After-the-fact enforcement actions address only a fraction of the abuses suffered by consumers and even in those cases, imperfect remedies and fly-by-night operators often make it impossible to make the victims whole. These realities impose an obligation on the Commission to devise rules that prevent harm to consumers.

To achieve the goal of deterring cramming, the various participants in the billing chain must be held accountable for their part in the billing process. Experience has shown that crammers have succeeded in defrauding consumers in part because they have been able to hide behind billing agents and billing telephone companies that disclaim responsibility for the charges placed on subscribers' phone bills, on the ground that another entity generated those charges. Many members of the public who have appeared before us view this stance as "passing the buck," with good reason. The interim rules on non-communications charges require billing agents and billing telephone companies to take responsibility for their actions. Responsible practices by the billing telephone companies, in particular, can prevent most cramming. For example, the interim rules require billing telephone companies to screen the companies they bill for, and to advise those entities that they will be required to provide proof of authorization whenever a subscriber disputes a charge.