VI. Comments to the Draft Decision

The draft decision of ALJ Econome was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure.

Talk and CSD filed comments or replies to the draft decision. We modify the draft decision in light of the comments to delete the draft decision's minor modification to the settlement.

The draft decision modified the settlement in order to ensure recourse against the Settlement Claims Administrator in the event of its misfeasance, and proposed that Talk should be liable for any error or omission of the Claims Administrator that results in nonpayment to eligible consumers. In its comments, Talk objected to this modification and alternatively proposed that Talk itself administer the claims. CSD replied that it prefers a neutral third party claims administrator, rather than Talk, to handle this task, and explained that consumers will be protected because (1) the Settlement Claims Administrator has the capability of tracking each individual restitution check mailed, and can send a replacement check to a consumer if necessary and (2) the Settlement Claims Administrator is insured for more than $3 million against any errors, omissions, or fraudulent acts by its employees that may occur in the course of its performance.⁵

We have utilized similar Settlement Claims Administrators in the past with success. (See e.g. Coleman, 2000 Cal. PUC LEXIS 1008 * 13). Given CSD's assurances in its reply comments and the Settlement Claims Administrator's level of insurance, we modify the draft decision to approve the settlement without modification.

Findings of Fact

1. The proposed settlement will achieve customer restitution because approximately 14,492 customers will receive restitution of $25 each, for a total of $374,800. The individual restitution payment is in line with other restitution payments we have approved in recent years.

2. The proposed settlement will protect the public and free the telecommunications market from a source of unfair competition.

Conclusions of Law

1. Because the proposed settlement can resolve this proceeding, evidentiary hearings are no longer necessary and this order should change the determination originally make in the OII and Scoping Memo.

2. The proposed settlement is reasonable in light of the whole record, consistent with the law, and in the public interest and therefore should be approved.

3. In order to achieve restitution to affected customers as soon as possible, this order should be effective immediately.

ORDER

IT IS ORDERED that:

1. The Settlement Agreement between the Consumer Services Division (CSD) and Talk America, Inc. (Talk), filed with this Commission on March 22, 2002, attached hereto as Appendix A, and Appendices B (fee agreement) and C (Settlement Claims Administration Plan) to the settlement, are approved .

2. Pacific Bell Telephone Company and Verizon California Inc. shall cooperate fully with CSD and other Commission staff to ensure that a complete and accurate list of "eligible consumers" of Talk, as defined by Section 7 of the Settlement Agreement, is provided on a timely basis to CSD.

3. Pursuant to Section 3.4 of the Settlement Agreement, billing agents and facilities-based providers shall cooperate with Talk to stop all billing, collecting, or demands for payment of which were caused by any alleged unauthorized switching of an "eligible consumer's" local, toll, or long distance service.

4. Pursuant to Section 3.5 of the Settlement Agreement, bill collection services or credit reporting bureaus or agencies who are directed to do so by Talk, shall reverse, cancel, or purge any of their records pertaining to an "eligible consumer's" nonpayment of outstanding debts owed to Talk, its parent corporation, or any affiliates that resulted from an alleged unauthorized switching of the "eligible consumers'" telephone service.

5. This proceeding is closed.

This order is effective today.

Dated June 27, 2002, at San Francisco, California.

LORETTA M. LYNCH

President

HENRY M. DUQUE

CARL W. WOOD

GEOFFREY F. BROWN

MICHAEL R. PEEVEY

Commissioners

APPENDIX A

THE PARTIES' SETTLEMENT

Parties. The following Parties enter into this Settlement of the Commission Order Instituting Investigation, I. 01-08-003, dated August 2, 2001, on this 22nd day of March 2002:

· The Consumer Services Division (CSD) of the California Public Utilities Commission (Commission); and

· Talk America, Inc. (U-5289-C and U-5535-C) (Talk or Respondent), formerly Talk.com Holding Corp. and Tel-Save, Inc.

Background

· In I. 01-08-003, CSD investigated inter alia whether Talk unlawfully:

· Switched California consumers' presubscribed local, intraLATA, or interLATA telephone services to Talk;

· Failed to verify customers' decisions to switch their telephone services, via an independent third-party verification company or otherwise in accordance with Section 2889.5;

· Charged consumers for telephone services without their authorization; and/or

· Engaged in misleading or abusive marketing practices and operations;

· Talk admits that it did not verify certain Eligible Consumers via an independent third-party verification company or otherwise in accordance with Section 2889.5, the Eligible Consumers' decisions to change their telephone services to Talk;

· Pursuant to the letter to CSD from Talk dated January 25, 2002, Talk and CSD mutually agreed to settle this matter instead of proceeding to hearing. Talk agreed to pay a total of $1 million in fines, customer restitutions, and related expenses, and further promised to deliver on or about February 8, 2002, to CSD $400,000;

· On or about February 11, 2002, Talk delivered a check for $400,000 as described above, which was deposited into the Restitution Escrow Account;

· Talk will retain with CSD concurrence the Settlement Claims Administrator (SCA), Rosenthal & Company LLC, 35 Leveroni Ct Ste 150, Novato CA 94949, to process, mail, and account for the restitution provided to the Eligible Consumers, in accordance with the Fee Agreement and Settlement Claims Administration Plan; and

· The Parties mutually desire to reach a full and final settlement of I. 01-08-003, and thus avoid the time, expense, uncertainty, and inconvenience of an evidentiary hearing.

In consideration of the above and the mutual covenants contained in this Settlement, the Parties by themselves or their authorized representative(s) agree as follows.

Terms and Conditions