FTC: Billers Could Be Liable for Cramming

The FCC isn’t the only agency creating new rules for billing systems. The Federal Trade Commission wants to expand its 900-number rules to fight unscrupulous crammers who use 800, 888 or other toll-free numbers to lure victims. These include voice mail, adult chat lines, psychic hotlines, and contest scams that trick consumers into making expensive long-distance calls.

And if you don’t think the FTC is serious, consider the case against American TelNet (ATN) which provides audiotext services. The FTC in June ordered the company to write off $37.4 million in charges disputed by customers, and to pay the customers who paid disputed charges $2 million. ATN billed customers for 900 calls that didn’t originate from customer’s phones; billed for audiotext services through toll-free numbers; charged customers for preamble disclosures at the beginning of 900 calls, and failed to adequately disclose pricing in ads.

To protect consumers from fraud, the FTC wants to tighten billing requirements. Among the changes that will affect billing:
? Billing companies will become liable for unsolicited telephone-billed charges on customer phone bills
? Billing companies will have to include dispute disclosure information on each month’s phone bill, not just annually
? Pay-per-call vendors will have to halt the assessment of time-based charges immediately upon the disconnection of the caller.

Representatives of LECs, IXCs, billing houses and pay-per-call vendors told the FTC what they thought of the proposed rules during a two-day workshop in May. Chief among the complaints: The FTC is overstepping its regulatory authority. They point to the FTC’s expansion of its jurisdiction to include “telephone-billed purchases,” too vague a term in the eyes of some billing companies.

“They’re now going to assert authority on all charges on phone bills, whether they’re 900 numbers or not,” says Gary Slaiman, who represents the Coalition to Ensure Responsible Billing (CERB), a group of seven billing clearinghouses including Billing Concepts, Integretel and OAN. “The FTC, front and center, is talking about enforcement authority for cramming,” for which the FCC has authority, Slaiman says.

“The Telephone Disclosure and Dispute Resolution Act gave the commission only limited jurisdiction and authority,” lawyers for Bell Atlantic argued. “The commission’s existing regulations are consistent with that authority, many of its proposed regulations are not.”

The FTC rules would also hold billing entities liable when unauthorized charges show up on customer bills. Section 308.17 of the pay-per-call rule would consider a “billing entity guilty of committing a deceptive act or practice if it bills or attempts to collect payment for a telephone-billed purchase where it ‘knew or should have known’ that the charge was not expressly authorized by the customer.”

That raises liability questions, and billers don’t like that. “Our biggest concern is the whole idea of vicarious liability. It’s an indeterminate liability standard that could be used against us,” says Ron Evans, vice president of operations at OAN Corp. and chairman of CERB. “If the final rule comes out with this undefined liability, it’s probably going to push each of the billing houses into being more conservative than they are today. In order not to incur undue liability that could kill a clearinghouse, each of us is going to react in ways that will make it even more difficult for new services and providers to get up and running.”

US West also argued against the liability rule. “Categorizing actions over which an entity has no control as a ‘deceptive billing practice’ simply confuses the natural lines of service provisioning and customer satisfaction,” US West’s senior attorney, Kathryn Marie Krause, told the FTC. “[It] assures that billing for these types of services will get more and more expensive to cover the cost of expanded liability.”

Nor do carriers and billing houses like the FTC’s proposal to require billing dispute disclosure information on customer bills every month. “To provide this type of notice every month on the 1.3 million bills printed by US West would involve a start-up cost alone in the area of $53,000 with a monthly recurring cost of around 5.25 cents per customer … for an annual cost of $819,000,” Krause argued.

The FTC also wants carriers to stop the clock on pay-per-call charges the moment the caller hangs up, in effect banning the practice of rounding up to the minute. That rule will create hardship on billing budgets, AT&T lawyers argued. “While it is technically feasible to implement sub-minute billing, that capability could not be provided without cost or without some reasonable lead time to modify billing systems. Ultimately, customers would bear the cost of these changes in the form of higher prices for services.”

“The FCC already regulates much of what goes into telephone envelopes, such as toll and other services,” Evans says. “The standard that you’re billed on is not per second, it’s in full minutes. The FTC is playing with the whole economics of how telecommunications work. It’s just going to shift how billing occurs and where it occurs, and we don’t think it accomplishes anything.”