C. Authorization Requirements

Effective July 1, 2001, non-communications-related charges may be included in a subscriber's telephone bill, provided both of the following conditions pertaining to authorization have been satisfied: (1) the subscriber has affirmatively "opted in", i.e., provided a general one-time authorization directly to the billing telephone company to open up the subscriber's account to non-communications charges; AND (2) the subscriber (or an individual designated by the subscriber directly to the billing telephone as individual authorized to place charges on the subscriber's account) has authorized the specific charge placed on the account. Each of these authorization requirements is described in more detail below.

(1) General ("opt-in") authorization: The billing telephone company may place non-communications charges on a subscriber's account only if it has first obtained express written authorization, directly from the subscriber, to include non-communications charges on that subscriber's telephone bill, and the subscriber has not revoked that authorization. Telephone billing companies may allow subscribers to designate, in writing, directly to the billing telephone company, the names of individual(s) who, in addition to the subscriber, are authorized to place non-communications-related charges on the subscriber's account. The billing telephone company must ensure (by use of PIN number or other equally reliable security procedure) that only the subscriber and those properly designated individuals place charges on the subscriber's account.

[Comments:

(1) Because billing for non-communications-related charges on telephone bills was previously prohibited by law, many subscribers initially will be unaware that they are now exposed to a new risk of having unauthorized charges for non-communications-related products or services improperly placed in their telephone bills. The Legislature has acknowledged that additional safeguards are necessary to protect consumers from the risk of being "crammed" with charges that are unrelated to telephone service or other communications services. (See Stats 2000, ch 931 (AB 994).) Consumers should not be exposed to this risk unknowingly.

Accordingly, these interim rules require billing telephone companies to obtain express permission from a subscriber to include non-communications-related charges before any non-communications-related charges may be included on that subscriber's bill. The Commission anticipates that once consumers generally are aware that non-communications-related charges may be placed on their phone bills, affording subscribers a blocking option may provide sufficient protection. The Commission, therefore, anticipates revisiting this provision after these rules have been in effect for approximately 18 months.

(2) A subscriber's authorization to allow non-communications-related charges, whether or not limited to a certain dollar amount, will be referred to as "non-communications-related charges authorization" to distinguish it from authorization of a specific charge ("point-of-sale authorization." See Rule C(2)).]

(a) In obtaining authorization to bill for non-communications charges, billing telephone companies must disclose in a clear and conspicuous manner all material terms and conditions related to this service. Material terms and conditions include any applicable fees and charges, including late payment penalties and interest; options for limiting authorization; how a subscriber may dispute a charge; how a subscriber may revoke authorization; and how a subscriber's confidential information is protected.

[Comments:

(1) Billing telephone companies may create forms for obtaining subscribers' authorization, although written authorization may be provided in other ways.

(2) Regardless of the manner in which written permission is given, billing telephone companies must provide sufficient information to enable consumers to make informed decisions about whether to allow non-communications charges on their telephone bills, and must abide by those decisions. (See § 2896.) They must disclose all material terms and conditions, and must not mislead subscribers in an effort to convince them to authorize the use of their telephone bill for non-communications-related charges. (See Id. and Business and Professions Code § 17500.) Companies that do so will be subject to sanctions by the Commission for violating the Public Utilities Code and these rules. Such practices may also lead to court-ordered penalties pursuant to California's Unfair Competition Law (Business and Professions Code §§ 17200 and 17500).

(3) If a subscriber disputes a charge on the ground that the subscriber had not authorized the billing telephone company to include non-communication-related charges on the subscriber's bill, the billing telephone company bears the burden of proving that the subscriber did in fact provide such authorization.]

(b) In obtaining authorization under this rule, billing telephone companies must give the subscriber the option of specifying a dollar maximum per charge and per billing cycle (for example, a $10 limit on individual charges and a $100 limit per billing cycle) on the non-communications-related charges that may be charged to the subscriber's account. Billing telephone companies must inform subscribers of this limited authorization option when soliciting authorization from a subscriber, or when responding to a subscriber's request for information about charging non-communications-related products and services on the telephone bill. Billing telephone companies must comply with subscribers' requests to limit authorization previously given. This rule does not preclude billing telephone companies from setting dollar limits lower than those specified by the subscriber.

[Comments:

(1) Billing telephone companies are encouraged to consider placing a monetary limit on the amounts that subscribers may charge to their telephone bills for non-communications products and services, even if the subscriber does not request it.

(2) Consumer groups and the Attorney General urged the Commission to require billing telephone companies to allow subscribers to limit non-communications-related charges to specific vendors or types of products. Carriers, in general, argued that their billing systems are not flexible enough to allow these options. The Commission will not, at this time, require billing telephone companies to provide subscribers with these options, but it strongly encourages billing telephone companies to explore means of providing them. The Commission notes that state law and federal Truth-In-Billing rules require charges to be separated by provider; therefore, it should be feasible to give subscribers the option of limiting non-communications-related authorization to specific vendors.]

(2) Point-of-sale authorization: Only charges that the subscriber (or another named individual specifically designated by the subscriber, in writing, directly to the telephone billing company, as authorized to place charges on the subscriber's account) has specifically authorized may be included on the subscriber's bill. The vendor must ensure (by use of PIN number or other equally reliable security procedure) that only the subscriber and those properly designated individuals place charges on the subscriber's account.

[Comments:

(1) The primary goal of Sections 2889.9 and 2890 and of these rules is to ensure that only authorized charges are billed to subscribers, i.e., to deter "cramming." Billing telephone companies, billing agents, and vendors all are responsible for ensuring that only authorized charges are billed.

(2) Requiring PIN number authorization is one way to ensure that a purchase is properly authorized at the point of sale. As commenters pointed out in response to the first draft of these rules, however, better methods of ensuring proper authorization may exist or may be developed in the future. Accordingly, these rules allow flexibility in the means used to ensure authorization. Whatever the security procedure used, it should be at least as reliable as a PIN number, however. In the event a subscriber claims that a charge was unauthorized, the billing telephone company may not require the subscriber to pay the charge until the billing telephone company has obtained proof of proper authorization from the vendor or from the billing agent that submitted the charge for billing.

(3) This type of authorization will be referred to as "point-of sale authorization" to distinguish it from general authorization to include non-communications charges on a subscriber's telephone bill (see Rule C(1)).]

(3) A billing telephone company may not require payment from a subscriber for non-communications charges if that subscriber has not authorized the charges as required in this Rule, or if the billing telephone company is unable to verify those authorizations.