On April 22, 1998, William Kennard, Chairman of the Federal Communications Commission (FCC), invited a group of the largest local exchange carrier (LEC) providers of billing and collection services, along with representatives of USTA, ALTS, and CompTel, to participate in a workshop to develop a set of guidelines that represent best practices to combat the problem known as "cramming". Cramming refers to the submission or inclusion of unauthorized, misleading, or deceptive charges on consumers' local telephone bills. The billing relationship between the Service Providers and the LECs stems from the fact that many LECs bill their local telephone customers for some services provided by others such as long distance carriers and information service providers, pursuant to contracts and/or tariffs.
The cramming problem has increasingly been receiving a great deal of attention from federal and state legislators, regulatory agencies, and law enforcement agencies. In his April 22 letter to prospective workshop participants, Chairman Kennard expressed his strong concern over the rate at which consumers are experiencing cramming. In addition to the consumer harm caused by cramming, Chairman Kennard recognized the harm that cramming causes the LECs, both in the costs incurred by the LECs and the damage caused to the LECs reputations with consumers. Chairman Kennard expressed the willingness of the FCC staff to assist the workshop in its efforts, and to provide a neutral forum for the workshop's activities. In his opening remarks at the initial workshop meeting on May 20, 1998, Chairman Kennard described cramming as a serious problem that is likely to become even more serious in the near future. He urged the workshop participants to come up with a way to handle this growing problem. FCC Commissioner Susan Ness also spoke to the workshop participants about the cramming problem.
At the May 20 meeting, the workshop participants were also addressed by Congressman Bart Gordon of Tennessee, who echoed the concerns of Chairman Kennard about the serious consumer problem represented by cramming. Congressman Gordon characterized cramming as the fastest growing consumer fraud, and one that affects the most vulnerable consumers.
The workshop participants uniformly concur with the views of Chairman Kennard and Congressman Gordon concerning cramming. The workshop participants are committed to seeking ways to eliminate cramming and prevent the substantial harm that cramming is causing to consumers. In addition, as pointed out by Chairman Kennard, the workshop participants recognize that cramming results in substantial harm to the LEC providers of billing services. Cramming causes the LECs to incur significant cost and effort to investigate and resolve the numerous individual consumer complaints. In addition, because many consumers view the LECs (rather than the Service Providers) as imposing these improper charges, cramming damages the LEC's reputation and hurts consumer confidence in the LEC.
Various individual LECs have already developed and implemented a number of measures designed to remedy the cramming problem. Despite these efforts, however, the cramming problem has continued to grow. As recognized by the FCC in deciding to convene this workshop, a more elaborate, comprehensive effort that makes use of the collective experience and ideas of the participants is necessary in order to have a meaningful impact on cramming.
The guidelines set out below represent the culmination of the workshop's efforts to identify best practices designed to prevent, deter, and eliminate cramming. Although the guidelines were jointly developed by the workshop participants, the decision of whether, and to what extent, to implement any or all of these guidelines is an individual company decision to be made by each LEC unilaterally.
The cramming problem that led to the convening of this workshop stems from the submission of charges by third parties to LECs for inclusion on consumers' local telephone bills, and does not involve billing for services provided by the LECs. Thus, the guidelines are intended to deal solely with cramming by third parties. While the scope of these guidelines is third party billing on the LEC bill, the LECs affirm their responsibility to ensure that consumers are afforded basic billing rights for all billing on the local telephone bill, including the LEC's own. These consumer rights include:
(1) a clear, concise description of services being billed,
(2) full disclosure of all terms and conditions,
(3) billing for authorized services only, and
(4) prompt and courteous treatment of all disputed charges.
In addition, effective regulatory mechanisms are in place today to deal with any problems caused by the billing of products or services provided by the LECs.
There is no single cure for the cramming problem. These guidelines offer various methods for combating cramming. It is not expected that any LEC would need to implement all these best practices, or any particular best practice. Rather, it is expected that the maximum consumer benefit will result from each LEC choosing from among these best practices those that best suit its individual circumstances. Further, it is not intended that the identification of the best practices set out below would preclude the implementation of other practices reasonably calculated to address cramming problems.
If a LEC chooses to implement a particular best practice, it is expected that such practice will be implemented in an objective, fair, and equitable manner.
Definitions of Commonly Used Terms
For purposes of these guidelines, the following definitions shall apply:
Billing and Collection Customer (B&C Customer): Any entity who submits billing information under contract to the LEC to be included on the End-user Customer's billing statement.
Clearinghouse: Billing and collection customers that aggregate billing for their Service Provider customers and submit that billing to the LEC.
Cramming: The submission or inclusion of unauthorized, misleading, or deceptive charges for products or services on End-user Customers' local telephone bills.
End-user Customer: The party (i.e., the consumer) identified in the account records of a local exchange carrier issuing a telephone bill (or on whose behalf a telephone bill is issued), any other person identified in such records as authorized to change the services subscribed to or to charge services to the account, and any person contractually or otherwise lawfully authorized to represent such party.
End-user Customer Complaint: An oral or written communication between an End-user Customer and an authorized representative of a LEC where the customer identifies an unauthorized, deceptive or misleading charge, or charges.
Local Exchange Carrier (LEC): The local telephone company (this would include CLECs) that renders the bill to the End-user Customer.
Service Provider: The party that offers the product or service to the End-user Customer and directly or indirectly sends the billable charges/credits to the LEC, for billing to the End-user Customer.
SubCIC Entity (SubCIC): A Service Provider that is a customer of a Clearinghouse and has no direct (or contractual) relationship with the LEC.
Best Practices Guidelines
The following best practices guidelines present options that can be considered for Billing and Collections processes, procedures and contracts.
I. Contract Provisions
- Programs advertised via "box" or sweepstakes/contest entry forms
- Programs initiated via "assumptive sale" or "negative option" plans
- Suggested text phrase language for bill presentation
- The name, date and issue number for any publication(s) in which the product or service will be advertised
- Advertisement placement plans
- Copy of actual advertisement (print advertisement, tape of radio or television advertisement, etc.)
- Internet web page address where product or service will be advertised or where the End-user Customer may subscribe to the product or service
- Detailed description of how the product is ordered, including any telemarketing scripts (if telemarketing is used)
- Detailed description of how the product can be canceled
- Detailed description of how the End-user Customer can generate questions, request adjustments, etc., including a description of how such requests will be accommodated
- Copy of actual post sale fulfillment documentation
As part of the screening process, the LEC should consider determining that all promotional and marketing materials:
- clearly and accurately describe the services being purchased
- clearly and conspicuously disclose all material terms and conditions of the offer, including without limitation,
- the amount of the charge which will be billed to the End-user Customer's telephone bill
- if the charge is a recurring charge, the frequency of billing and any minimum time interval for which the End-user Customer will be billed
- clearly and conspicuously disclose that the charges will appear on the End-user Customer's telephone bill
- do not contain any information which is false, misleading or deceptive
- SubCIC Company Name
- SubCIC Company Address
- SubCIC Company Officer Names
- State of Incorporation
- Public Utility/Service Commission certification, as required
- State registration for each state for which billing will be submitted
- Information regarding whether the company, its affiliates and its principals or any company that its principals have been associated with have been subject to prior conviction for billing related or other consumer fraud, had access to billing services terminated or been denied access to billing services
- Type of data to be billed
- Estimated number of customers to be billed
- Inquiry company name and address
- Inquiry procedures
- Names of other companies with whom they have a billing contract
- Number of complaints and adjustments associated with other billing companies
The LEC should consider implementing the following general contract provisions:
The LEC should consider imposing appropriate compensatory
administrative charges when the above described service level
threshold(s) (for complaints, adjustments or queries) are
exceeded. There are a number of appropriate methods for
calculating the dollar amount of any such charges. One possible
methodology is as follows:
In addition, the LEC should consider assessing an administrative charge when a charge for a product or a service not approved by the LEC is placed on the End-user Customer's bill.
In an effort to assist the Clearinghouses in their efforts to identify problematic subCICs, consideration should be given to computing and reporting these charges at the subCIC level.
The LEC should consider settlement process modifications, that could include the following:
As mentioned above, Clearinghouses are billing and collection customers that aggregate billing for their subCIC customers and submit that billing to the LEC, on behalf of the subCIC(s). Experience has shown that many of the cramming problems have occurred on charges originating at the subCIC level. Therefore, to have a meaningful effect on cramming, the LEC should consider establishing criteria for Clearinghouse responsibilities, as follows:
The LEC should consider establishing procedures to preserve the confidentiality of proprietary information furnished to the LEC as part of the screening process. Such procedures should include limiting the use and disclosure of such information to the performance by the LEC of the product screening function and the provision of billing and collection services. In addition, the LECs should consider a contract provision to maintain the confidentiality of such proprietary information furnished to the LEC, to the extent consistent with legal or regulatory requirements. Information or data which is in the public domain or becomes available to the LEC from a source other than the service provider should not be considered proprietary or confidential.
The LEC should consider a contract provision that expressly permits the LEC to disclose the categories of data described in detail in item III below.
II. Process for Authorization/Verification of End User Approval
It is recognized that both the LEC and the Service Provider have a direct relationship with the consumer, and therefore have a responsibility to ensure that no unauthorized non-message telephone service charges are assessed via the LEC bill. However, it is the Service Provider's responsibility to inform End-user Customers of rates, terms, and conditions of its services and to obtain and retain the necessary End-user Customer authorization and verification as set out below.
To ensure that End-user Customers are appropriately informed of Service Provider rates, terms and conditions, the LEC should consider obtaining assurance from the Service Provider that the following processes and conditions are met by the Service Provider for authorization and verification of a Service Provider non-message telephone service charge.
- Name and telephone number of the End-user Customer
- Question and answer to ensure that the End-user Customer is qualified to make the requested changes and to authorize billing
- Question and answer regarding the End-user Customer's age, to ensure that authorization is provided by an of-age End-user Customer
- Explanation of the product/service being offered
- Explanation of all applicable charges
- Explicit End-user Customer acknowledgment that said charges will be assessed via the telephone bill
- Explanation of how a service or product can be canceled
- Description of how the charge will appear on the telephone bill
- Information related to whom to call (and the appropriate toll-free telephone number) for inquiries
III. Disclosure of Information
Aside from the beneficial regulatory and law enforcement goals that the disclosure of such information would serve, the LECs have a significant interest in obtaining the information submitted by others that relates to the LECs' current billing and collection customers as well as prospective billing and collection customers. Among other things, such information would permit the LECs to do the following:
IV. End-User Customer Dispute Resolution Process
Each LEC should consider establishing an End-user Customer Dispute Resolution Process. For example:
The LEC should also recognize the potential for abuse by End-user Customers in the dispute resolution process and should take this into account in developing appropriate dispute resolution mechanisms.
V. Enforcement of Compliance with Existing Laws by Government Agencies
Upon appropriate request from regulatory, government, and/or legislative bodies, the LEC should provide documentation regarding Service Provider billing and collection contract violations.
VI. Bill Format
An End-user Customer's rights will be upheld and the End-user Customer's telephone service will not be disconnected for failure to pay non-deniable charges. Prior to disconnection of service for other appropriate reasons, an End-user Customer rights/advisory message should be displayed on the bill or other notification upon which the non-deniable charges appear.
The LEC should consider modifications to the Bill Format that include:
VII. Consumer Billing Controls
The workshop participants believe that consumers should have the ability to avoid the inclusion of unauthorized service or product charges on their local telephone bills. The LEC should consider retaining the right, at the request of an End-user Customer, to limit which End-user Customers may receive billing as a result of a B&C contract.
The workshop participants recognize that there are significant implementation issues associated with such controls. Needed mechanization presents significant technical challenges and costs and will require an extended period of time to implement. To avoid abuse by consumers, a method to notify Service Providers would have to be developed for use in conjunction with allowing consumers the ability to "block" billing on the LEC bill. Most importantly, to effectively block at a Service Provider level, there would have to be a universally assigned, nationwide subCIC designated for each Service Provider. This is an industry wide issue.
Despite these challenges, however, consumer-designated billing options can be an extremely powerful method of controlling third party cramming on the LEC bill and should be actively pursued.
Individual LECs may opt, in the short-term, to implement internal processes that would give consumers some limited control over miscellaneous charges and their appearances on a LEC bill.
VIII. End-user Customer Education
The workshop's participants recommend the following as potential End-user Customer education initiatives: