Cramming (Pub. Util. Code §§ 451 and 2890)

Both §§ 451 and 2890 prohibit cramming. In Coral, we concluded that §451 requires that all public utility charges and terms of service be just and reasonable.² Further, we stated that:

"[p]lacing charges on a person's local telephone bill based on an invalid `authorization' is unreasonable. Unreasonable practices are prohibited by § 451."³

Section 2890 sets forth specific requirements for inclusion of charges on consumers' telephone bills. In relevant part, § 2890 states:

"(a) A telephone bill may only contain charges for products or services, the purchase of which the subscriber has authorized. ..."

Position of CSD

CSD contends that Accutel violated § 451 by imposing a monthly service charge of $4.95 on consumers' telephone bills for a calling card not authorized by consumers. In support of its position, CSD states that the Commission's Consumer Affairs Branch (CAB) received 234 cramming/ slamming complaints about Accutel from January 1998 through May 1999. Further, CSD alleges that Pacific Bell (Pacific) logged 689 cramming complaints against Accutel during 1998. Additionally, from July 10, 1997, through August 8, 1999, CSD asserts that OAN Services, Inc. (OAN) billed and collected on behalf of Accutel 55,000 California Billing Telephone Numbers (BTNs) and of these credited 43,992 BTNs.⁴

CSD rejects Accutel's defense that cramming complaints are attributable to other calling card companies for which Accutel acted as a billing agent. CSD argues that Accutel is legally accountable for the cramming violations, regardless of whether Accutel processed billings for other companies, since California customers were always billed in the name of Accutel. CSD also asserts that by agreement with OAN and under law, Accutel was only allowed to charge for services or products that California customers had originated through Accutel and not on behalf of other companies.

Position of Accutel

Accutel describes itself as a non-facilities based reseller of long distance services. In addition to providing both retail and wholesale products, Accutel states it also acted as a billing agent for its resellers and calling card companies.

In order to bill consumers, Accutel contracted with OAN. Accutel states that it transmitted data to OAN which then processed and transmitted the data to the local exchange carriers for billing.

Accutel does not dispute that unauthorized charges appeared on consumers' phone bills. However, Accutel contends that the erroneous charges made in late 1998 and early 1999 relate primarily to billings it processed on behalf of other calling card companies. Specifically, Accutel was contacted in Spring 1998 by Bonneville Marketing to act as a billing agent for Coral Communications, PCI, Veterans Association of America, Advantage Auto Club and American Network, and also to provide underlying carrier services for the companies' calling cards. In 1998, Accutel provided billing and rating services for these calling card companies, including billing for a monthly service charge.

Accutel states that after it commenced billing the monthly service charges, consumers began complaining. In response to the complaints, Accutel states that it adopted a "no questions asked" policy, and that it authorized credits to those consumers who complained. Further, Accutel states that it terminated its contracts with the calling card companies in late summer or early Fall 1998. Accutel asserts that at least two months were needed to implement internal corrections of the problems caused by the calling card companies.

Accutel contends that it executed the directions of the calling card companies when it transmitted the data to OAN, which processed and transmitted the data to the local exchange carriers for billing to cardholders. Accutel argues that it acted as a billing agent for calling card companies and should therefore not be held responsible for the unauthorized charges. Accutel also argues that D.99-08-017 supports its position because the Commission found that Accutel was acting as a billing agent for Coral Communications.

Discussion

It is uncontested that unauthorized charges appeared on consumers' telephone bills. On behalf of Accutel, OAN billed consumers a $4.95 monthly service charge. In response to consumer complaints that the charge was not authorized, OAN provided credits to approximately 43,992 consumers.⁵ Accutel did not dispute the number of credits, but instead attributed the unauthorized charges to other calling card companies for which Accutel asserts it provided billing services. These credits support a finding that at least 43,992 incidents occurred in which unauthorized charges were imposed on consumers' phone bills.

The dispute is whether Accutel should be held responsible for these uncontested unauthorized charges imposed on consumers' telephone bills. In essence, Accutel claims it is an innocent third-party. Accutel attributes liability for the unauthorized charges to other calling card companies. In addition, Accutel states it mitigated the situation by taking actions to halt unauthorized charges and also adopting a "no questions asked" refund policy.

CSD substantiated Accutel's mitigation efforts. For instance, CSD sponsored a witness from Pacific who stated that the number of complaints about Accutel declined dramatically in 1999, consistent with the actions Accutel claimed it took to remedy increased consumer complaints.⁶ When Accutel ceased providing billing services to calling card companies, it appears that cramming problems abated. CSD also substantiated Accutel's assertion of a helpful "no questions asked" refund policy. CSD's consumer witnesses testified that when Accutel was contacted it was helpful and responsive.

Accutel's defense is not an issue of first impression. In Coral, the Commission addressed this issue with the same actors involved in this proceeding. In Coral, the Commission dismissed OAN's defense that it was an innocent third party and did not knowingly cooperate with other telecommunication firms involved in wrongful billing. The Commission stated that:

OAN attempts to shield its role in this billing by blaming its client, Accutel. Again, OAN misses the point. OAN willingly engaged in a business relationship with Accutel. OAN's business judgment turned out to be faulty as Accutel is accused of widespread violations of the Public Utilities Code. ... Unlike customers, OAN could and should have prevented the entire transaction. OAN is in the business of providing billing services. Pacific Bell's tariffs place the duty to present only authorized billings squarely on OAN. Accutel is not the first billing and collection customer to place unauthorized charges on local telephone bills. OAN should have taken reasonable steps to ensure that Accutel's billings were authorized. (D.01-04-035 at pp. 53-54, mimeo.)

In this instance, Accutel bears the same burden to ensure that consumers in fact had authorized the $4.95. Accutel is responsible for the billings it processed for third-party calling card companies. Accutel cannot escape responsibility by claiming it was unaware that charges it processed were not authorized. Additionally, later efforts to remedy the situation do not relieve Accutel of responsibility to comply with §§ 451 and 2890. Consequently, we find Accutel accountable for the 43,992 unauthorized charges that appeared on consumers' telephone bills. We agree with CSD's assertion that such unauthorized charges are unreasonable and therefore violate §§ 451 and 2890.

We are uncertain about the economic harm caused to the public since the majority of consumer witnesses that CSD sponsored also testified that they had been reimbursed for unauthorized charges. Similarly, most of the consumers interviewed by CSD stated that they had received credits for erroneous charges. Further, Accutel testified that as a matter of practice it made refunds to all consumers who requested credits. It also appears from some of CSD's exhibits that both OAN and Pacific provided credits to consumers.

In summary, the record indicates that cramming occurred and that affected consumers received credits for unauthorized charges.