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 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: 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.

(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 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.]




(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.]