Legislature(2011 - 2012)BELTZ 105 (TSBldg)

03/23/2012 01:30 PM JUDICIARY

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled But Not Heard
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Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSSB 200(JUD) Out of Committee
Moved CSSB 210(JUD) Out of Committee
Moved CSSB 212(JUD) Out of Committee
         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                                                               
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                                                               
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                                                               
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                                                                
3:02:09 PM                                                                                                                    
CHAIR FRENCH announced he would hold SB 138 in committee.                                                                       

Document Name Date/Time Subjects
SJR 19 Sponsor Statement.pdf SJUD 3/23/2012 1:30:00 PM
SJR 19
SJR 19 Map of Judicial Districts.pdf SJUD 3/23/2012 1:30:00 PM
SJR 19
SJR 19 Article VI, Section 8 vs SJR 19 Table.pdf SJUD 3/23/2012 1:30:00 PM
SJR 19
SB138-Sponsor statement.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB138-Sectional Analysis.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB138-Fact Sheet.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB138-Exhibit II -Sample Residential Bill.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB138-Exhibit II - Sample Enterprise Bill.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB138 letter of support.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB138 backup material- US Senate Committee Findings.PDF SJUD 3/23/2012 1:30:00 PM
SB 138
SB138 Back up material-7.13.11 Testimony of Elliot Burg and VT Cramming Bill.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB 180 - Leg Research.PDF SJUD 3/23/2012 1:30:00 PM
SB 180
SB 180 Public Health Report.pdf SJUD 3/23/2012 1:30:00 PM
SB 180
SB 180 - vE.PDF SJUD 3/23/2012 1:30:00 PM
SB 180
SB 180 version E - explanation of changes.docx SJUD 3/23/2012 1:30:00 PM
SB 180
SB 138 Letter ACS 03.22.12.pdf SJUD 3/23/2012 1:30:00 PM
SB 138
SB 138 Final_Signed_Comments_to_FCC.pdf SJUD 3/23/2012 1:30:00 PM
SB 138