E. 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 on 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.
