4. Recent California Legislation

4.1. Unauthorized Customer Transfer (Slamming)

Assembly Bill (AB) 284 (Stats. 1998, Ch. 672) amends § 2889.5 to require telephone corporations switching a subscriber's residential telephone service provider to send the subscriber a clear and legible notice of the change of presubscribed carrier and provide the subscriber with the customer service telephone number the subscriber may call if the subscriber did not authorize the change. The subscriber notice must be sent by United States Postal Service within 14 days of the switch.

AB 284 further amends § 2889.5 to address subscriber liability in cases of unauthorized service order switches or slams. AB 284 makes telephone corporations that violate the verification procedures of § 2889.5 liable to the subscriber for any charges the subscriber paid in excess of the amount that the subscriber would have been obligated to pay had the subscriber's telephone service never changed (referred to here as "overcharge").4

Senate Bill (SB) 405 (Stats. 1998, Ch.663) effectively codifies D.97-06-096 by requiring that prior to a telephone company exiting the business of providing interexchange service to all or an entire class of its customers by transferring the customers to another carrier, the telephone company must provide the affected customers with 30-days written notice of the proposed transfer and must effectuate the transfer without charge to the customer. The notice must contain a straightforward description of the proposed transfer, it must notify the customer of all applicable rates, terms, and conditions of the new service, it must inform the customer of the right to transfer to another carrier, and it must provide the customer with a toll-free customer service number the customer can contact with questions.

4.2. Unauthorized Billing ("Cramming")

Assembly Bill 2142 (Stats. 1998, Ch. 1036) and SB 378 (Stats. 1998, Ch. 1041) add §§ 2889.9 and 2890, respectively. These bills, which the legislation instructs are to be read together, were passed to deter cramming and to clarify the rights and remedies available to California consumers with regard to telephone billing disputes.

Until the year 2001, SB 378 permits only "communications-related" goods and services to be charged on a telephone bill, although it allows the Commission to permit Billing Telephone Companies5 to include charges for Commission-specified "non-communications-related" goods and services on a separate bill within the telephone bill envelope. After January 1, 2001, any product or service can be billed on the telephone bill unless the Commission takes action to restrict such billing. The requirements of SB 378 apply to both communications-related goods and services charged on the telephone bill and noncommunications-related goods and services charged on a separate bill included in the telephone bill envelope.

SB 378 requires telephone bills and bills included in the same envelope as the telephone bill to contain only subscriber-authorized charges. SB 378 establishes a rebuttable presumption that unverified charges are not authorized and that the subscriber is not responsible for the charges. The legislation provides an exception to the verification requirement in the case of direct dialed telephone services where evidence that the call was dialed is prima facie evidence of authorization of nonrecurring charges resulting from the call.

SB 378 sets rules for both the billing telephone company and the person, corporation, and billing agent that bill for a product or service on the telephone bill or separate bill within the telephone bill envelope. SB 378 requires each person, corporation, or billing agent that charges for a product or service on a telephone bill or separate bill within the telephone bill envelope to do all of the following: (1) ensure that there is a clear and concise description of the product or service on the telephone bill; (2) include the amount charged for each product or service including taxes and surcharges; (3) explain how to resolve any dispute about the charges including the name, address and telephone number of the party responsible for generating the charge and a description of dispute procedures; (4) provide the telephone number at the Commission where a consumer may register a complaint; (5) establish, maintain, and staff a toll-free telephone number to respond to questions or disputes about the charges billed; (6) provide a means for expeditiously resolving subscriber disputes of charges that were not authorized; and (7) resolve all billing disputes within 30 days of receipt of the dispute. A billing telephone company may not bill for a person, corporation, or billing agent unless the entity has complied with these requirements. The billing telephone company must also use a separate billing section for each person, corporation, or billing agent that generates a charge on the subscriber's telephone bill.

SB 378 and AB 2142 also contain requirements regarding solicitation of subscriber authorization for the purchase of products and services billed on the telephone bill or on a separate bill within the telephone bill envelope. SB 378 provides that where subscriber authorization for the purchase of a product or service is obtained by a written order, such order cannot be used as an entry form for a sweepstakes or contest. The written order must be a separate document from all solicitation materials, must explain the nature of the transaction, must be in the same language as the solicitation, must be unambiguous and legible, and must be in a minimum 10-point type.

AB 2142 prohibits a person or corporation from misrepresenting its association or affiliation with another telephone carrier when soliciting, inducing, or otherwise implementing the subscriber's agreement to purchase the person's or corporation's product or service and have it billed on the subscriber's telephone bill.

SB 378 recognizes the Commission's authority to permit local telephone service disconnection for nonpayment of charges owed to another service provider but limits that permissive authority to charges (1) relating to subscriber's basic local service, (2) intra local access and transport area (LATA) and interLATA service, and (3) international service. The Commission is not required to allow such disconnections but "may" do so only for the enumerated types of charges.

AB 2142 applies penal provisions, commencing with § 2100, to public utilities subject to §§ 2889.9 and 2890. In addition, AB 2142 expands the Commission's jurisdiction and permits the Commission to enforce §§ 2102 to 2111 and 2114 against violators of the provisions of §§ 2889.9 and 2890 as if the violators were public utilities. AB 2142 further permits the Commission to order a Billing Telephone Company to terminate billing and collection services to violators of §§ 2889.9 and 2890 or persons, corporations or billing agents that fail to respond to Commission staff requests for information.

Effective January 1, 1999, AB 2142, codified as § 2889.9, gives the Commission limited jurisdiction over billing agents and companies that provide products or services charged on subscribers' telephone bills. That same section requires the Commission to establish rules for each billing entity to provide to the Commission reports of consumer complaints. The adopted rules are set out in Attachment B and require each telephone company that provides billing services to third parties and billing agents to maintain consumer complaint records and to submit those records to the Commission on a quarterly basis.

The Legislature has also recognized the key role of Billing Telephone Companies and imposes additional mandatory duties requiring them to bill only for charges that include a clear and concise description of the product or service, a process for disputing the charge, and a toll-free telephone number at which the provider maintains sufficient staff to respond to disputes.

New § 2890 requires the Billing Telephone Companies to ensure that these standards are being met. We expect the Billing Telephone Companies to monitor compliance with these standards and to take prompt action to terminate the billing contract where any billing customer fails to meet these requirements.

To the extent these new responsibilities impose costs upon the Billing Telephone Companies, such costs should be either absorbed by the Billing Telephone Companies or passed on to those service providers that purchase billing services.

The Legislature also granted the Commission authority to impose its penalty provisions against billing agents that violate §§ 2889.9 and 2890. In addition to the requirements discussed above regarding authorized charges, consumer dispute resolution processes, and complaint tracking, all billing agents must respond to Commission staff requests for information or be subject to immediate termination of their billing rights through California Billing Telephone Companies. The Commission is also granted broad authority to "adopt rules, regulations, and issue decisions and orders, as necessary, to safeguard the rights of consumers and to enforce the provisions of [the statutes]."

In D.99-08-017, the Commission stated its intent to fully utilize this new authority to combat unauthorized charges in California telephone bills. In D. 99-10-048, the Commission used its new authority and directed all California Billing Telephone Companies to cease providing billing services to two billing agents that had failed to comply with a Commission directive.

4 While AB 1096 (Stats. 1998, Ch. 671), which made telephone corporations that violated verification procedures liable to the customer for a 10% overcharge penalty, was signed into law, because AB 284, which amended the same code section, was signed into law after AB 1096, the provisions of AB 1096 were "chaptered out" and will not take effect. 5 This is the new statutory term that refers to those companies that provide third party billing. Currently, only incumbent local exchange carriers provide such service but this fact may change in the future; hence, the more inclusive term of Billing Telephone Companies. 6 Both §§ 2889.9 and 2890 define "billing agent" as a "clearinghouse or billing aggregator." The Subscriber Complaint Reporting Rules set out in Attachment B clarify the statutory definition and define "Billing Agent" as "any entity which provides billing service for service providers directly or indirectly through a billing telephone corporation."

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