PART 3 - Rules Governing Billing for Non-Communications-Related Charges
The purpose of these rules is to protect consumers from unauthorized charges on their telephone bills, specifically, charges for non-communications-related products and services. Effective July 1, 2001, such non-communications-related charges are no longer barred by statute. These rules are intended to give consumers control over whether to use their telephone bills to pay for non-communications-related products and services; to ensure that consumers have sufficient information to make informed choices about this service and, if they use it, to verify charges on their bills; to provide for prompt and effective recourse if they find unauthorized charges or other billing errors related to non-communications charges on their telephone bills; and to protect the confidentiality of information they provide to telephone companies.
These rules apply to: (1) any telephone corporation, as defined in Public Utilities Code Section 234, operating in California, whether providing landline or wireless telephone service, that chooses to open its telephone billing service to non-communications-related products and services; (2) any billing agent that presents such charges to a California telephone corporation on behalf of another entity; and (3) any vendor of non-communications-related products or services that bills for those products or services on a California subscriber's telephone bill, whether it makes billing arrangements directly with the California billing telephone company or indirectly through billing agents. Business entities in all three categories must comply with the applicable rules in this Part. These rules apply to billing for residential telephone service, business telephone service, and combined or undifferentiated residential/business telephone service.
These rules are intended to be consistent with other consumer protection laws that are or may be applicable to billing for products and services unrelated to telephone service. These laws include state and federal laws governing debt collection activity and consumer credit. The Commission's rules governing non-communications-related charges on telephone bills are not intended to deprive consumers of other remedies available under such laws.
Compliance with these rules does not relieve carriers of other obligations they may have under their tariffs, other Commission general orders and decisions, FCC orders, and state and federal statutes.
The Commission intends to continue its policy of cooperating with law enforcement authorities to enforce consumer protection laws that prohibit misleading advertising and other unfair business practices. These rules do not preclude any civil action that may be available by law. The remedies the Commission may impose for violations of these rules are not intended to displace other remedies that may be imposed by the courts for violation of consumer protection laws.
These rules are not intended to create a private right of action to impose liability on carriers or other utilities for damages, which liability would not exist had these rights not been adopted.
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 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. The billing telephone company must use a PIN number or other equally reliable security procedure designed to prevent anyone other than the subscriber and individuals authorized by the subscriber from placing charges on the subscriber's account. Opt-in authorization information or confirmation, including any assigned or confirmed PIN, must be sent to the subscriber's billing address even if the authorization lists a different address for delivery of products or services.
[Comment: 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.]
(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; any available options for limiting authorization (for example, to a dollar amount per month); how a subscriber may dispute a charge; the fact that the billing telephone company may not terminate basic local service, file an adverse credit report, or charge interest or finance charges on disputed amounts; 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 remedies 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.
(4) See limitation on late payment penalties in Part 2, Rule 7(a).]
(2) Point-of-sale authorization: Only charges that the subscriber has specifically authorized may be included on the subscriber's bill. Authorization must be provided by use of PIN number or other equally reliable security procedure.
[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) Subscribers may not be held liable for unauthorized charges. Subscribers must make a reasonable, good-faith effort to notify the billing telephone company promptly when the subscriber becomes aware of a probability of unauthorized use of the subscriber's account. If the billing telephone company is unable to verify authorization, a charge is deemed unauthorized.
[Comment: Section 2890 provides that a telephone bill "may only contain charges for products or services, the purchase of which the subscriber has authorized." This provision mandates a "zero-liability" rule for unauthorized charges.]
C. Revocation of Opt-in Authorization
(1) By subscriber: Subscribers may revoke authorization to allow non-communications charges on their bills at any time without charge. They may do so by notifying their billing telephone company, by telephone, in writing, or via the Internet, that they no longer wish to allow non-communications charges on their telephone bill. The billing telephone company must confirm the revocation in writing within 10 business days. This written confirmation shall indicate the date and time the subscriber notified the billing telephone company that authorization was revoked. Billing telephone companies must allow subscribers to revoke authorization by telephone 7 days a week, 24 hours a day. The right to revoke authorization to allow charges includes charges from standing authorizations previously made by the subscriber, such as charges for monthly dues or subscription service. This right is in addition to any other right that the subscriber may have to cancel the transaction that gave rise to the billing charge.
[Comment: As with credit cards, the consumer must be able to revoke authorization at any time to protect the subscriber in the event of attempted fraudulent use of the subscriber's account. As subscribers cannot be held liable for unauthorized charges, this provision protects the billing telephone company as well.]
(2) By billing telephone company: A billing telephone company may suspend a subscriber's authorization to bill for non-communications charges without prior notice if the company has reason to suspect fraudulent or unauthorized use of the subscriber's account. The billing telephone company shall give prompt notice to the subscriber of such action. In all other cases, a billing telephone company must
provide reasonable notice before suspending or revoking the subscriber's authorization. Billing telephone companies must inform subscribers of their revocation policies when soliciting subscribers' authorization and when responding to subscribers' requests for information about the billing service.
(3) Any agreement by a subscriber not to revoke an authorization is contrary to public policy and of no effect.
D. Billing Telephone Companies' Obligations to Screen and Monitor Entities for Whom They Bill
(1) Billing telephone companies must take reasonable precautions to screen vendors and billing agents before agreeing to provide billing services for them, in order to screen out unreliable or untrustworthy business entities.
(2) Before providing billing services to any vendor or billing agent, billing telephone companies must require and obtain from the vendor or billing agent the following information:
(a) If the company is a corporation or other type of business entity required to file with the State of California (Secretary of State or other state agency) as a domestic or foreign corporation, its legal name as registered with the State of California, and if doing business under a different name in California, its fictitious name as registered in each county in California in which it is doing business under that fictitious name.
(b) If the company is not a corporation or other type of business entity required to register with the State of California (Secretary of State or other state agency), but is doing business under a fictitious name, its fictitious name as registered in each county in California in which it is doing business under the fictitious name. Billing telephone companies must provide this information to the Commission and the California Attorney General upon request.
(3) Contracts to provide billing services for vendors and billing agents must provide that the billing telephone company will require proof of authorization for all charges disputed by subscribers, including but not limited to the nature, time, place and fact of the authorization; the nature, qualities and price of the product or service; and other charges of any and every kind, such as taxes, charges for other products and services, shipping expenses, interest, and penalties; and the legal basis for any such charge, and that without such proof, the subscriber will be credited for the charge and the corresponding amount withheld from the vendor or billing agent. Billing telephone companies may impose fees on these vendors and billing agents for the cost of investigating and resolving subscriber complaints.
(4) Billing telephone companies must monitor the performance of the vendors and billing agents for whom they provide billing services, promptly investigate subscribers' complaints, whether written or verbal, of unauthorized charges and other billing errors, and promptly suspend billing on behalf of a vendor or billing agent whose charges are generating a significant percentage of complaints (over five percent in two out of three consecutive months), or if the billing company has
any other reason to believe unauthorized billings are being presented to it. A billing telephone company may resume billing for a vendor or billing agent after investigating the alleged billing errors, if it has determined that the problem(s) underlying the errors have been resolved.
[Comment: Regarding what constitutes a "significant percentage" of complaints, the Federal Trade Commission has defined "excessive consumer dispute chargebacks" in the credit card context as chargebacks that exceed three percent of all credit card transactions for any single company for two out of three consecutive months. See In re Citicorp Credit Services, Inc. (1993), FTC No. C-3413, 116 F.T.C. 87, 1993 Lexis 19 (holding that failure to investigate excessive chargebacks and terminate billing when excessive chargebacks occur constitutes an unfair business practice in violation of the Federal Trade Commission Act.]
(5) Billing telephone companies must keep records of all subscriber complaints, both written and verbal, of unauthorized non-communications charges and other billing errors related to those charges for at least four years, and be able to categorize those complaints by vendor and by billing agent. Billing telephone companies will make this complaint information available to Commission staff or the California Attorney General upon request.
[Comment: As a further deterrent to cramming, billing telephone companies are encouraged to consider including escalating fee provisions in their contracts with billing agents and vendors, so that those vendors whose charges generate a large number of complaints quickly suffer financial consequences. The purpose of such provisions is to make cramming unprofitable for vendors and billing agents, thereby eliminating the incentive to engage in the practice and reducing the harm to consumers, as well as the number of complaints addressed to billing telephone companies and the Commission.]
(6) The Rosenthal Fair Debt Collection Practices Act, Sections 1788-1788.17 of the California Civil Code, applies to the billing and collection activity of telephone corporations subject to these rules. Insofar as these rules require action inconsistent with an explicit requirement of that Act, that Act shall apply.
E. No Disconnection of Basic Telephone Service for Nonpayment of Non-Communications Charges
Billing telephone companies that provide basic local exchange service may not disconnect or suspend a subscriber's basic service for failure to pay any non-communications charge on the subscriber's telephone bill. Billing telephone companies must give subscribers notice of this rule when requesting initial authorization and on every bill that contains non-communication-related charges.
[Comment: See definition of basic service and § 779.2].
(1) When discussing non-payment of charges with subscribers, orally or in writing, billing telephone companies must inform them of this rule in a clear and conspicuous manner.
(2) Billing telephone companies and their agents, as well as billing agents, vendors, and their agents, including assignees of accounts receivables, may not tell subscribers or lead them to believe that subscribers' basic local exchange service may be disconnected for failure to pay for non-communications charges.
(3) Unless otherwise directed by the subscriber at the time the payment is made, billing telephone companies shall credit partial payment amounts in the following order: (1) local exchange telephone service and associated mandatory fees and taxes; (2) other communications-related charges; (3) other charges.
(1) The billing telephone company is responsible for ensuring that subscriber complaints about non-communication charges on its bills are processed as required by these rules. Subscriber questions and complaints concerning non-communications-related charges should be addressed to the billing telephone company, or to its agent, as designated on the bill. The telephone bill must include a prominently displayed toll-free customer service number for this purpose. The toll-free number must be adequately staffed by personnel with sufficient training and authority to answer questions, investigate complaints, and adjust bills in favor of subscribers when appropriate.
Telephone companies are required to provide adequate customer service as a telecommunications provider (see the Telecommunications Customer Service Act of 1993, codified at Sections 2895-2897). They must ensure that the additional customer service required of them in connection with non-communications charges does not negatively impact telephone customer service.
(2) Billing telephone companies or their agents shall promptly investigate subscribers' complaints of billing errors. Within 30 days of receiving a complaint of a billing error unrelated to the subscribers' telephone service, the billing telephone company must either credit the disputed charge to the customer or acknowledge, in writing, receipt of the complaint, and must verify the validity of the charge. Billing telephone companies must resolve such complaints within 60 days.
[Comment: These rules are meant to be consistent both with Section 2890 and with federal regulations governing credit card transactions, which may be applicable as well in some cases. See 15 U.S.C. 1666(a)(3)(A),(B) and 12 C.F.R. 226.13(c)(1),(2).]
(3) While the investigation is pending, the subscriber shall not be required to pay the disputed charge, no late charges or penalties may be applied, the charge may not be sent to collection, and no adverse credit report may be made based on non-payment of that charge.
(4) The billing telephone company or, if the vendor is handling the complaint, the vendor, will notify the subscriber in writing of the result of its investigation. If the vendor has failed to provide proof of authorization within the time allowed, the billing telephone company will credit the charge to the subscriber. If the billing telephone company has obtained proof of authorization within the time allowed, it may require payment of the charge within 30 days of sending written notice to the subscriber. The notice shall state the reason for the creditor's belief that the billing error alleged by the subscriber is incorrect and include the amount due and the date of payment. If, however, the subscriber alleges that the authorization provided was fraudulent, or the billing telephone company has reason to believe it was fraudulent based on other information, the billing telephone company has an obligation to investigate further. An authorization is fraudulent if it is inauthentic (not given by the subscriber) or obtained from the subscriber based on false or misleading information. Consumers must be given copies of evidence to support the billing telephone companies' allegations that charges are authorized if the consumer so requests. Consumers who request such evidence will be given a time period equal to one billing cycle or ten days, whichever is less, to determine if the evidence is authentic and to offer other evidence, by oral statements or otherwise, that would show the purchase was not authorized by the subscriber.
(5) If the subscriber alleges that a non-communications charge is improper because the subscriber had not "opted in," i.e., consented to the inclusion of non-communications charges on the telephone bill (see Rule C(1)), or had revoked such authorization, the billing telephone company bears the burden of proving that it had a valid general authorization from the subscriber at the time the particular charge was authorized.
(6) A subscriber dissatisfied with the billing telephone company's resolution of the complaint may file an informal complaint with the Commission's Consumer Affairs Branch (CAB). Consumers who believe they have been crammed may also notify other agencies such as the District Attorney's Office in their county or the Attorney General's Office.
(7) Pending CAB's investigation, the subscriber's obligation to pay the disputed charge is stayed, provided that the subscriber's complaint was filed with CAB within 30 days from the date the billing telephone company notified the subscriber of its decision in writing.
(8) If CAB obtains proof of proper authorization, CAB will so inform the subscriber and the billing telephone company in writing. Within 30 days of such a notice, the subscriber must pay the disputed charge if it has not been paid. If the subscriber believes CAB's conclusion was in error, the subscriber may appeal CAB's conclusion to a Consumer Affairs Manager. If the subscriber does not agree with
the Consumer Affairs Manager's conclusion, the subscriber may file a formal complaint with the Commission. The filing of a formal complaint does not, however, stay the subscriber's obligation to pay the disputed charge.
(9) If CAB is unable to obtain proof of proper authorization, it will ask the billing telephone company, in writing, to remove the charge. If the billing telephone company fails to remove the charge, the subscriber may file a formal complaint with the Commission. CAB may refer the case to the Commission's
Consumer Protection and Safety Division or to other law enforcement agencies for further investigation.
(10) A billing telephone company shall credit a payment to the subscriber's account as of the date of receipt, except when a delay in crediting does not result in a finance or other charge. If a billing telephone company fails to credit payment as required in this rule, in time to avoid the imposition of finance or other charges, the billing telephone company shall adjust the subscriber's account so that the charges imposed are credited to the subscriber's account during the next billing cycle.
(11) When a positive balance in excess of $1 is credited on a telecommunications account (through transmittal of funds to the billing telephone company in excess of the total balance due on an account, through rebates of unearned charges, or through amounts otherwise owed to or held for the benefit of a subscriber) the billing telephone company shall: Credit the amount of the credit balance to the subscriber's account; refund any part of the remaining credit balance within seven business days from receipt of a written request from the subscriber; and make a good faith effort to refund to the subscriber by cash, check, or money order, or credit to a deposit account of the subscriber, any part of the credit balance remaining in the account for more than six months. No further action is required if the subscriber's current location is not known to the billing telephone company and cannot be traced through the subscriber's last known address or telephone number.
(12) When an entity other than the billing telephone company accepts the return of property or forgives a debt for services, and agrees to credit the subscriber's telephone bill, the entity shall, within seven business days from accepting the return or forgiving the debt, transmit a credit statement to the billing telephone company through normal channels for billing statements. The billing telephone company shall, within 3 business days from receipt of a credit statement, credit the subscriber's account with the amount of the refund.
(13) Nothing in these rules precludes a subscriber that has been the victim of cramming, misleading advertising, or other unfair business practice from pursuing other legal remedies and obtaining relief that the subscriber may be entitled to under state or federal law.
(1) Telephone bills containing non-communications charges must be clearly organized, readily understandable, and provide sufficient information to enable subscribers to verify whether the charges they were billed for are the charges they authorized. They must satisfy all of the applicable requirements set forth in Sections 2889.9 and 2890.
(2) Non-communications charges must be placed in one or more separate sections of the telephone bill clearly labeled "Non-communications-related charges," separate from the charges for telecommunications services. The name of the vendor and billing agent associated with each charge must be clearly identified.
(a) Upon request, billing telephone companies shall provide Commission staff and the Attorney General with information about the types of non-communications-related products and services they bill, and the names of the vendors and billing agents on whose behalf they bill for these charges. Billing telephone companies shall require the vendors on whose behalf they bill, either directly or indirectly through billing agents, to provide the necessary information.
(3) Each bill must provide a clear, concise, non-misleading description of the product or service for which a charge has been imposed. The description of the product or service must be sufficiently clear and specific to enable subscribers to determine whether the products or services for which they are being billed are the products or services that they have requested and received.
(4) If the telephone bill includes charges for local exchange service, the section of the bill containing non-communications charges must include a notice that states:
"The telephone company is not allowed to disconnect your basic local service for failure to pay this portion of your bill. It may, however, take steps other than disconnection, as permitted by law, to collect legitimate charges."
H. Confidential Subscriber Information
Billing telephone companies may not release confidential subscriber information, credit or financial information, or any other confidential information about a subscriber, including information about a subscriber's spending patterns, to their affiliates or to other third parties, without the subscriber's informed, written consent, with the following exceptions:
Confidential information may be released: (1) to affiliates of the billing telephone company, or to others, to the extent necessary to provide and bill for telecommunication services; (2) to a law enforcement agency or other public agency for the purpose of responding to an emergency ("911"); (3) to law enforcement personnel in possession of a valid search warrant for the information sought; (4) if required to turn over such information by a court order; or (5) if otherwise required by law. In addition, information about unpaid charges may be released to a collection agency for the purpose of collecting a debt, subject to the requirements of Rule G (Complaint procedures) and all
[Comment: See §§ 2891- 2891.1, and 47 U.S.C. § 222.]applicable laws.
The Commission may impose fines and other penalties on billing telephone companies, billing agents, and vendors that fail to comply with these rules. Nothing in these rules, however, precludes district attorneys, the Attorney General, or other law enforcement agencies from obtaining injunctive relief, civil penalties, and other relief permitted by law against a billing telephone company, billing agent, or vendor that engages in business practices that violate these rules and/or the provisions of state law. The Commission will make relevant complaint data and investigation reports available to the Attorney General and to district attorneys who are investigating possible consumer fraud.
[Comments:
(1) On the Commission's authority to impose penalties on billing agents and vendors, see §§ 2889.9- 2890.
(2) Government Code § 26509 requires the Commission to give district attorneys access to complaints against, and the Commission's investigation of, a person being investigated by a district attorney regarding possible consumer fraud.]
