Legislature(2011 - 2012)BELTZ 105 (TSBldg)
03/23/2012 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB200 | |
| SB210 | |
| SB212 | |
| SB180 | |
| SB138 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SJR 19 | TELECONFERENCED | |
| += | SB 180 | TELECONFERENCED | |
| + | SB 138 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 200 | TELECONFERENCED | |
| += | SB 210 | TELECONFERENCED | |
| += | SB 212 | TELECONFERENCED | |
SB 138-THIRD-PARTY CHARGES ON TELEPHONE BILLS
2:47:12 PM
CHAIR FRENCH announced the consideration of SB 138. [CSSB
138(L&C) was before the committee.]
2:47:21 PM
SENATOR WIELECHOWSKI, sponsor of SB 138, said this bill dealt
with "telephone cramming," which as the practice of placing
unauthorized, third-party charges on telephone bills. This was a
multi-billion-dollar problem, and the federal government had
started to take notice.
CHAIR FRENCH said that because of time constraints, the
committee would hear most public testimony on Monday.
2:50:12 PM
THOMAS PRESLEY, intern for Senator Wielechowski, said SB 138
bans the practice of cramming, which is adding unauthorized
third-party charges to consumers' telephone bills. He explained
that cramming began in the 1990s, and was an unintended
consequence of regulatory action that opened telephone bills to
other charges. Following a spike in complaints, regulatory
agencies opted for a voluntary approach to end the practice, but
current evidence indicates that telecommunications companies
place approximately 300 million third-party charges on
customers' telephone bills, equaling over $2 billion per year.
In one example, a woman who disputed charges on her phone bill
was told that her husband authorized the service, but he had
been dead for 13 years.
MR. PRESLEY said that cramming occurs by never interacting with
customers or by using abusive marketing techniques to get
customers' telephone numbers. The consumer's phone number then
becomes a form of tacit authorization.
He said that charges for satellite TV and long distance coverage
are legitimate, and these services contract directly with
telephone companies. The process for contracting cram services
onto bills is different. Of 500 people who responded to
inquiries about cramming charges, not a single person or
business had authorized the charges. Unauthorized charges occur
for bank vaults, elevators, 911 systems, fire alarms,
governmental agencies and schools. Obvious examples are of a
modem incurring charges for voice mail and of an emergency line
incurring charges for online diet services.
MR. PRESLEY said a telephone auditing company found more than
800 third-party vendors placed unauthorized charges on their
clients' telephone bills. Consumers described their experience
using words like fraud, theft and stealing. A Federal
Communications Commission (FCC) graphic indicated that 15 to 20
million American households receive cram charges on their
landline bills each year, but only 1 in 20 customers are aware
of the charges.
MR. PRESLEY presented a graphic to illustrate the complexity of
cramming charges. One third-party vendor, My S&S, showed only
975 unique numbers dialed into its voice mail service, yet it
was charging at least 97,000 customers for the service. Another
third-party vender enrolled 64,000 telephone customers in an on-
line photo storage service, yet less than 2 percent of the
customers took advantage of the service. In another instance,
U.S. Senate committee staff was the first to log onto a casual
gaming service offered by Easy Phone Bill, despite its having
enrolled more than 20,000 customers and having earned almost $1
million.
He explained that hub companies subcontract enrollment and
authorizations. The hub companies receive the phone numbers and
pass them along to billing aggregators through third-party
vendors, and the charges are forwarded to telephone bills.
Third-party vendors offer services like electronic fax, photo
storage, and online backup. To gain access to bills, they
contract with billing aggregators. Despite their offers, many
third-party vendors are actually front companies. This
relationship allows hub companies to shift enrollments to other
vendors to mask large numbers of complaints. Billing aggregators
act as intermediaries between phone companies and third-party
vendors.
A hub company called DaData claimed to provide support services
to 40 third-party vendors, but eventually admitted that it
controlled the actual electronic fax service offered by 25
clients. He provided a list of the 45 companies that offer
electronic fax service yet appear to be operated exclusively by
DaData.
He said the U.S. Senate staff interviewed the president of WVM
Network who admitted that he "only signed his name to documents
and knew nothing about the company." Having a hub company with
smaller entities beneath it makes it easy to shift the complaint
threshold and difficult to track, dispute and remove charges.
MR. PRESLEY reiterated that disputing cram charges is difficult
and costly. One retail chain reported $550,000 in unauthorized
charges on its telephone bills over the past decade and another
estimated it spent $400,000 battling unauthorized third-party
charges. One customer said each of the five times that charges
were added to his bill it took at least a half hour to get the
services removed.
MR. PRESLEY said Section 1 of SB 138 enforces truth in billing
guidelines. It requires carriers to disclose detailed
information on bills, precludes carriers from billing customers
without including details of third-party services, and forbids a
carrier from discontinuing service to customers that use the
contact information to dispute or contest a charge. Section 2
adds a paragraph to the list of unlawful acts and practices
under the Consumer Protection statutes. Section 3 creates a new
section that precludes a carrier from billing for another vendor
without express authorization. Section 4 adds the new unlawful
act or practice from Section 2 to the exclusive jurisdiction of
the state, a regulatory board or a commission.
MR. PRESLEY said recent events include that Verizon two days ago
announced it would discontinue charging third-party enhanced
billing services to phone bills. Senator Rockefeller from West
Virginia said he would introduce federal legislation to ban all
third-party billing on phone bills. Illinois two days ago
unanimously passed a total ban on third-party billing. He said
this is different from SB 138, which allows express
authorization of third-party services.
MR. PRESLEY said that the recent opposition letter from Alaska
Communication Services (ACS) specifically complains about the
possibility of customers short paying disputed charges. However,
all local exchange carriers operate under truth in billing
guidelines so there is no opportunity to shortchange a local
carrier by not paying an unauthorized charge.
3:00:30 PM
MARIE DARLIN, AARP, stated that AARP supports SB 138, a consumer
protection bill that addresses the deceptive marketing practice
of cramming. She noted that AARP submitted written testimony to
the previous committee and a letter would be forthcoming to this
committee.
3:02:09 PM
CHAIR FRENCH announced he would hold SB 138 in committee.