Legislature(2011 - 2012)BELTZ 105 (TSBldg)
03/26/2012 02:00 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB168 | |
| SB198 | |
| SB138 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 168 | TELECONFERENCED | |
| += | SB 138 | TELECONFERENCED | |
| += | SB 198 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 138-THIRD-PARTY CHARGES ON TELEPHONE BILLS
2:13:48 PM
CHAIR FRENCH announced the consideration of SB 138, "An Act
relating to the inclusion of the charges of a vendor of goods or
services on the bills of certain telecommunications carriers;
and adding an unlawful act to the Alaska Unfair Trade Practices
and Consumer Protection Act."
He asked Mr. Presley if the bill affected just landlines, not
cellphones.
THOMAS PRESLEY, Intern to Senator Bill Wielechowski, sponsor of
SB 138, explained that cramming affects both, but SB 138 focuses
on landlines.
CHAIR FRENCH asked how prevalent the problem is in Alaska.
MR. PRESLEY replied it's difficult to ascertain because
consumers are generally unaware of the problem.
2:15:18 PM
CRAIG GRAZIANO, Attorney, Office of Consumer Advocate, Iowa
Department of Justice, and Chair of the Consumer Protection
Committee, National Association of State Utility Consumer
Advocates, stated that in 1999 Iowa passed a statute and
regulations prohibiting unauthorized changes in
telecommunication service, including cramming. He confirmed that
the problem is not confined to wire-line billings. Civil
penalties of up to $10,000 can be assessed for each violation,
although the average penalty is just $1,500. The belief is that
the penalties take the profit out of the practice and appear to
have a sentinel effect throughout the industry. He said that the
regulatory efforts have reduced the volume of complaints
markedly. He described four complaints and commented that these
were probably the tip of the iceberg, because most consumers did
not notice unauthorized charges. He highlighted that the FCC
issued a $3 million penalty against one company for instituting
an Internet order validation system that did not validate
anything.
MR. GRAZIANO offered his belief that states are in the best
position to stop the problem. They're close to the complainants
and often have the resources to assist victims, institute
enforcement proceedings, force restitution, and assess
penalties.
2:20:13 PM
SENATOR PASKVAN asked if the companies that engage in cramming
are generally U.S.-based, offshore, or international.
MR. GRAZIANO said that most of the companies that put the
charges on bills have domestic addresses, but he didn't know if
their operations were located in the U.S.
SENATOR PASKVAN asked how the $3 million penalty compared to the
amount of money that the companies collected by cramming.
MR. GRAZIANO said he didn't know the correlation, but that same
day the FCC issued similar penalties to three other companies
for similar violations.
2:22:05 PM
CHAIR FRENCH asked if he believes that crammers target states
randomly or based on the strength of their anti-cramming laws.
MR. GRAZIANO opined that there was a good deal of awareness of
enforcement efforts.
2:22:44 PM
MATT WALLACE, Executive Director, Alaska Public Interest
Research Group (AKPIRG), stated that a key focus of AKPIRG is to
stop marketplace practices that track consumers and get into
their pocketbooks. He highlighted that the practice of cramming
is extremely widespread and that to some extent telephone
companies generate revenue from cramming by charging fees to
third parties and third-party aggregators.
He described SB 138 as a proactive step to stop scammers from
ripping off Alaskan consumers. He said that a growing number of
states are passing legislation to ban this practice, federal
legislation was pending introduction, and the large
telecommunications carrier, Verizon, had pledged to end the
practice of unauthorized third-party charges. He agreed that it
was difficult to surmise the impact of the problem in Alaska,
but that AKPIRG had received a number of calls since it started
its investigation. He concluded that this is a huge first step
and AKPIRG looks forward in the future to investigating the
problem in the wireless market.
CHAIR FRENCH noted that attorney Cindy Drinkwater with the
Department of Law consumer protection was available to answer
questions.
2:26:37 PM
DEBORAH COOK, Senior Manager, Billings and Collections, Alaska
Communications Systems, said the vice president of legal,
regulatory, and government affairs asked her to read the
following letter into the record: [Original punctuation
provided.[
Alaska Communications discourages further action on
CSSB 138. However, if further action is taken by the
Senate Judiciary Committee, Alaska Communications
recommends a few amendments, which are attached to
this letter.
If enacted, CSSB 138 would place new burdens on
telecommunications providers that provide third party
billing services. Alaska Communications opposes this
legislation because there is no evidence of a problem
in this area that needs fixing. We are not aware of
any consumer rebellion tied to third party billing, we
do not have a large in-box filled with complaints, and
we are not aware of this being an issue for other
telecommunications providers in Alaska. For these
reasons, we see no need for legislation such as CSSB
138.
Alaska Communications does bill customers for third
parties at the same time it bills for its own
services. Customers do short pay bills and when they
inform us of the reason we allocate the funds
submitted appropriately. Too often, however, customers
fail to explain why [their] bill is short paid or how
to allocate the funds they submit. in the absence of
any information from the customer, Alaska
Communications applies a rational allocation of the
funds between itself and the third parties. This can
lead to nonpayment of telephone bills through no fault
of the telephone provider.
Alaska Communications takes its responsibility to
provide quality services very seriously. Customers
too, however, need to be responsible and explain why
they have short paid a bill and how to allocate any
funds submitted. Therefore, although Alaska
communications sees no need for this legislation at
all, we submit the attached proposed amendment
providing for customer responsibility for your
consideration.
2:29:02 PM
MS. COOK reviewed the amendments suggested by ACS. In Section 1,
add to subsection (b) a new paragraph (5) that says that
telecommunications carriers may recover reasonable costs of
implementing the bill. To subsection (c) add a new paragraph (1)
that says that customers must explain in writing that there is a
dispute and how to allocate their payment if they are short
paying their bill. In Section 3, add to subsection (c)(4) a new
subparagraph (C) that says that telecommunications carriers are
not obliged to verify the accuracy of third-party charges.
2:30:17 PM
SENATOR PASKVAN asked if ACS monitors billings for evidence of
potential cramming.
MS. COOK answered yes; ACS validates billings as they go out and
is careful about who can be third-party providers. Disputed 800
calls are returned to the third-party provider without question.
SENATOR PASKVAN asked what process ACS follows to allow a third-
party vender to place a charge on a customer's bill.
MS. COOK explained that ACS requires a contractual relationship
with its venders so it knows where the billing is coming from.
ACS is the customer's advocate for questions to third parties
and the fraud department can validate charges for the customer.
However, she emphasized, it is the customer's responsibility to
let ACS know if there is a disputed charge.
SENATOR PASKVAN asked if ACS substantively investigates
providers and if it profits from third-party charges.
MS. COOK replied there are costs associated with billings, but
ACS does background checks and validates providers before they
are allowed to place charges on ACS billings.
SENATOR PASKVAN said he was trying to find out whether the
contractual relationship includes a substantive inquiry, or if
the provider simply has to sign a boilerplate agreement.
MS. COOK explained that the inquiry includes credit validation,
validation of previous services, and contractual obligations
once ACS does billings for someone. She noted that ACS rarely
signs new third parties for wireless billings
2:35:32 PM
CHAIR FRENCH asked for some mainstream examples of third-party
vendors, other than sex hotlines.
MS. COOK replied ACS regularly does third-party billing for 800
lines, people who are incarcerated, and directory advertising.
She reiterated that these are all thoroughly vetted.
CHAIR FRENCH asked the volume of business that these billings
represent and if ACS makes money on third-party billings.
MS. COOK said the directory contract is the largest and a signed
contract is required, but she would have to follow up with
specific information about volume.
2:38:00 PM
SENATOR WIELECHOWSKI asked if ACS charges for third party
enhanced services that are not telephone related. He cited diet
services as an example.
MS. COOK said that about five years ago ACS saw potential
problems and told providers they would no longer bill for things
like diet services and magazines.
SENATOR PASKVAN said he was looking for reasonable assurance
that ACS was working in the consumer's interest to eliminate the
potential for cramming.
MS. COOK responded that it is in the best interest of both the
consumer and ACS to eliminate inappropriate billing.
SENATOR COGHILL asked if ACS would move away from third-party
services if the bill were to pass without the amendments that
ACS suggested.
MS. COOK replied ACS is already moving away from these services.
The amendments would help make the customer aware that without
their input it is difficult for ACS to know that there is a
problem. As a general policy, ACS takes action as soon as it is
aware that there is an issue.
2:41:27 PM
CHAIR FRENCH summarized that ACS customers have supposedly
agreed to each of the charges on their bill.
MS. COOK answered that's correct.
SENATOR PASKVAN asked if all the agreements are in writing.
MS. COOK responded that the agreements can be verbal if there is
some capture of a voice recording, but ACS prefers signed
written contracts. Verbal contracts are more thoroughly
investigated.
SENATOR PASKVAN asked how quickly ACS pays the third-party
vender after it sends the bill to the customer.
MS. COOK said it was probably between 60 and 120 days, but she
would have to confirm that.
SENATOR WIELECHOWSKI asked to hear from Ms. Drinkwater.
2:45:32 PM
CYNTHIA DRINKWATER, Assistant Attorney General, Civil Division,
Commercial/Fair Business Section, Department of Law (DOL),
introduced herself and offered to answer questions.
CHAIR FRENCH asked if the administration supports the bill.
MS. DRINKWATER replied she wasn't in a position to offer support
or not; she was prepared to address legal issues that might be
of concern to the committee.
SENATOR WIELECHOWSKI asked her to discuss the memo the state
attorney general signed regarding the FCC action.
MS. DRINKWATER explained that in October 2011 a number of state
attorneys general, including Alaska, signed a letter to the FCC
commenting on proposed rulemaking regarding telephone cramming.
The letter urged the FCC to consider either an outright ban on
cramming or a ban with exceptions for telephone-related services
such as collect calls and inmate calls. Another alternative was
for a system where consumers would opt in to certain charges on
a vender-by-vender basis as opposed to the current situation
where consumers essentially have to opt out by calling their
carrier to have charges removed from their bills.
2:48:34 PM
SENATOR WIELECHOWSKI asked if SB 138 addresses the concerns that
the administration advocated for in the letter to the FCC.
MS. DRINKWATER replied the intent is consistent and it does
require venders or billing aggregators to provide proof to the
carrier of express authorization. This would be of assistance in
an investigation because it is sometimes difficult to find the
party that placed the charge on the bill. However, the bill
still leaves room for abusive practices such as doctoring
telephone recordings and failure to verify that a consumer
agreed to a service.
2:51:00 PM
SENATOR PASKVAN asked if the bill would be beneficial to the
extent that it would authorize the attorney general's office to
take action under AS 45.50.471(b) if a cramming company was
abusing Alaskans.
MS. DRINKWATER said the attorney general's office would probably
have some authority to proceed with a cramming investigation
under any circumstances, but the bill would make it easier to
obtain records of customers' authorization if it was indeed
given.
SENATOR PASKVAN asked how she would proceed as to an unlawful or
deceptive act unless it was under AS 45.50.471(b).
MS. DRINKWATER responded that there is benefit to a specific
listing because it makes it easier to show there has been a
violation, but the unlawful acts listed in subsection (b) aren't
exclusive.
SENATOR WIELECHOWSKI asked what rationale the Parnell
administration and other state attorneys general gave when they
urged the FCC to outright ban third-party cramming.
MS. DRINKWATER replied it was to stop those practices whereby
customers are billed for services they didn't authorize or agree
to.
SENATOR COGHILL asked if, under the present law, DOL would take
action against the carrier or the third-party vender if it
became aware of unauthorized charges on consumers' telephone
bills.
MS. DRINKWATER replied DOL currently has the ability to issue
subpoenas or civil investigative demands, but the difficulty
with cramming investigations is that it is sometimes difficult
to find the party that is placing the charges on the bills.
SENATOR COGHILL asked whose fault that is.
MS. DRINKWATER said that in her somewhat limited experience
there is more problem finding the vender.
SENATOR COGHILL asked if cramming might not become an even
larger issue for cellphones.
MS. DRINKWATER offered her understanding that cramming on
cellphones would increase in the future. She agreed with Mr.
Presley's comment that as cellphone use increases, people would
probably pay less attention to their landline bills.
SENATOR COGHILL asked if it was reasonable for ACS to request
that customers take responsibility in notifying the carrier
about unauthorized charges.
MS. DRINKWATER said she wasn't in a position to comment because
this was the first she'd heard that customers weren't passing
that information along to their carriers.
2:58:48 PM
SENATOR PASKVAN asked if she believes that carriers have an
obligation to screen third-party venders.
MS. DRINKWATER said that consumers should not have to face
charges on their phone bills for services that they did not
agree to, and it makes sense that carriers should have a process
to ensure that doesn't happen. She reiterated that one advantage
of the bill is that it would require venders or billing
aggregators to produce proof of express authorization to the
carriers. That would seemingly help carriers ensure that the
consumer really did agree to a service before they are billed
for it.
MR. PRESLEY spoke to ACS's objection to the bill by pointing out
that the truth in billing guidelines recommend that
telecommunications carriers separate on the bill those charges
that will result in loss of service and charges that, if not
paid, will not result in loss of service. He noted that two
judges have found that consumers should not have to be
investigators of their own phone bill.
In conclusion, he quoted from a letter that talked about the
state attorneys general recommendations regarding phone
cramming. He read the following:
Because the majority of customers do not want third-
party charges on their bills and most are unaware that
their telephone bills are vulnerable to such charges,
all wire line telephone companies should be required
to block third-party billing for all existing and
newly enrolled customers by default. The customer
should not be burdened with requesting a block, as
most customers will not understand [the need] for such
protection until after being victimized by a crammer.
CHAIR FRENCH announced he would hold SB 138 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 168 Letter Alaska Court System 03.23.12.pdf |
SJUD 3/26/2012 2:00:00 PM |
SB 168 |
| SB 168 version M.pdf |
SJUD 3/26/2012 2:00:00 PM |
SB 168 |