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Before the
Federal Communications Commission
Washington, D.C. 20554
)
)
In the Matter of File No. EB-11-TC-019
)
Norristown Telephone Company, LLC NAL/Acct. No.: 201132170022
)
Apparent Liability for Forfeiture FRN: 0013788369
)
)
Notice of apparent liability for forfeiture
Adopted: June 7, 2011 Released: June 16, 2011
By the Commission:
I. introduction
1. In this Notice of Apparent Liability for Forfeiture ("NAL"), we find
that Norristown Telephone Company, LLC ("Norristown" or "Company") has
apparently willfully and repeatedly violated section 201(b) of the
Communications Act of 1934, as amended ("Communications Act" or
"Act"), by "cramming" monthly charges for its dial-around long
distance service on consumers' local telephone bills without
authorization of any kind from them. Based upon our review of the
facts and surrounding circumstances, we find that Norristown is
apparently liable for a proposed forfeiture in the amount of one
million five hundred thousand dollars ($1,500,000).
II. background
2. Cramming, the practice of adding charges to a customer's local
telephone bill without the customer's authorization, results in
significant consumer harm. Charges can often range from $2.99 to as
much as $19.99 per month and can go undetected by consumers for many
months or longer because they are not generally disclosed clearly or
conspicuously on the bill. The cramming entity can be the customer's
own local exchange carrier ("LEC") or an unaffiliated third party such
as Norristown, in the instant case. The charges can be for additional
telephone services, voice mail and similar services, or for other
unrelated products and services such as chat lines, diet plans, and
cosmetics.
3. The Enforcement Bureau ("Bureau") began its investigation of
Norristown on March 15, 2011, by issuing a letter of inquiry to the
Company requesting information and documents relating to its charges
for long distance service. In its response, Norristown represented
that it provides domestic interexchange telecommunications service on
a resale basis through a "dial-around" service plan. Norristown's
FreeCallZone Plan offers 284 minutes of domestic interexchange calling
per month for $13.90, plus a monthly billing fee and applicable
Universal Service Fund surcharges. Minutes used in excess of the 284
minutes are billed at the rate of $.049 per minute.
4. Norristown's process for billing consumers involves three parties:
Norristown; its billing aggregator, Billing Service Group ("BSG"); and
the LEC that issues the bill to the consumer. BSG uses the name "USBI"
in billing for long distance services. The LEC is compensated by
BSG/USBI for placing the charges on the consumers' bills; BSG/USBI is
paid by Norristown to manage billing requests and payments between the
LEC and Norristown; and Norristown ultimately receives the money
collected from the consumers who pay the charges. Generally, the
third-party carrier supplies only a consumer's telephone number and
the amount to be charged to the billing aggregator, which directs the
LEC to place the charge on the consumer's telephone bill. Proof of
consumer authorization is not provided by the third-party carrier nor
required by the LEC.
5. Norristown contends that it markets its service exclusively on the
Internet through marketing partners who present the offer via
solicitation, keyword search, or banners. Since [REDACTED]. Online
enrollment forms used to sign up customers allow for the input of the
consumer's first name, last name, address, home telephone number,
email address, and date of birth. The enrollment form contains
Norristown's terms and conditions and notifies the customers that they
are signing up for a long distance plan for which they will be billed
on their telephone bill.
6. As part of its investigation, the Bureau examined [REDACTED]
complaints that had been filed by consumers about Norristown's
service. These included complaints that had been filed not only with
the FCC, but also with state regulatory authorities, Norristown's
billing aggregator, or with Norristown directly. All of the
complainants contended that Norristown had charged them for service
without their authorization.
7. These complaints notwithstanding, Norristown claims that it has
policies and procedures for verifying service requests. According to
Norristown, a "Confirmation Page" requires customers to reconfirm the
personal data entered on the enrollment form and discloses the billing
information. Norristown contends that it validates the orders by
comparing the name listed on the order form with the name registered
to the telephone number; examining the email address; and verifying
that the state, zip code, and telephone area code match. Norristown
asserts that the order is accepted only if the customer's last name,
address, and telephone number match.
8. According to Norristown, if the order passes the Company's validation
process, it then sends three emails to confirm the order, describe the
service, how to use the service and how to cancel it. The consumer is
not required to confirm that the emails were received or to otherwise
respond to the emails before Norristown begins charging for the
service.
III. discussion
A. Violation of Section 201(b) of the Act
9. Section 201(b) of the Act states, in pertinent part, that "[a]ll
charges, practices, classifications, and regulations for and in
connection with [interstate or foreign] communication service [by wire
or radio], shall be just and reasonable, and any such charge,
practice, classification, or regulation that is unjust or unreasonable
is hereby declared to be unlawful...." The Commission has found that
the inclusion of unauthorized charges and fees on consumers' telephone
bills is an "unjust and unreasonable" practice under section 201(b).
10. We find that Norristown has willfully and repeatedly placed, or caused
to be placed, charges on consumers' telephone bills for services the
consumers did not request or authorize. As indicated above, each of
the [REDACTED] consumer complaints that the Bureau reviewed - whether
they were filed with the FCC, state regulatory authorities, or with
Norristown directly - contends that Norristown charged consumers for
service without their authorization. The complainants consistently
state they did not sign up for Norristown's service, did not have any
contact with Norristown prior to discovering the charges, and in many
cases, do not even know the person whom Norristown alleges authorized
the service. Moreover, many of the complainants observed that they had
long distance (often unlimited) service with another carrier and
therefore would have no need to pay for additional service with
Norristown. For example, Complainant [REDACTED]. Complainant
[REDACTED].
11. The [REDACTED] complaint is typical of the complaints filed against
Norristown. For example, Complainant [REDACTED]. Complainant
[REDACTED]. Complainant [REDACTED].
12. In some cases, the line for which Norristown was purportedly providing
service was not even in use as a telephone line. For example,
Complainant [REDACTED]. Complainant [REDACTED].
13. The complainants' contention that Norristown "crammed" charges for its
dial-around long distance service on their bills is corroborated by
the fact that, between April 2010 and March 2011, Norristown placed
charges on a total of nearly [REDACTED] monthly telephone bills.
Nevertheless, in response to our LOI request that the Company provide
information about its "customers" who actually used its service,
Norristown stated [REDACTED]. We find this implausible given that
Norristown claims to provide customers with 284 minutes per month for
a monthly fee and that customers will incur additional charges after
those minutes are used - unless, of course, it is unnecessary because
so few "customers" actually use the service.
14. To the extent it actually uses them, Norristown's validation and
verification processes are clearly inadequate to confirm that the
person who "enrolled" in its plan, i.e., the one whom Norristown will
charge for service, in fact authorized the service. As indicated,
Norristown asserts that it confirms every service order using a
five-stage validation process to ensure that the customer has both
ordered the services and authorized billing for the services. The fact
remains that, in many cases, the name and address in Norristown's
enrollment records do not match the name and address of the customer
who was charged for service. Similarly, the email address used to sign
up for service often does not belong to the customer who is billed for
the service. The only information that consistently belonged to the
customer whom the Company charged was, in fact, his or her telephone
number. We find no evidence that, as Norristown suggests, complainants
commonly realized "that they did in fact sign up for the service or
someone else in the household signed up for and authorized the
service." Based on our review of the record, it appears that any
validation procedure that Norristown actually performed simply
verified the general existence of the telephone number and that the
number was a working number - and in no way verified that an enrollee
actually in any way intended to subscribe to Norristown's dial-around
service.
15. Norristown's claims that it "verifies" a service request by sending
emails to the email address identified on the form is likewise of no
consequence. The process does not require any action on the part of
the consumer to confirm either that the consumer received the email or
that the consumer signed up for or agreed to be charged for
Norristown's service. Indeed, many of the complainants assert they
never received any emails or other communications from Norristown
regarding its long distance service. This would not be surprising
given that, as noted above, the email address in Norristown's records
is generally not the consumer's. Even if a consumer did, in fact,
receive this welcome material, it is possible, if not probable, that
he or she might reasonably discard the material as "junk" mail or
spam, given that the consumer did not create a relationship with, or
even know of the existence of, Norristown. On these facts, if a
consumer did not authorize Norristown's service, the mere act of
sending emails without requiring a response from the consumer is not
sufficient "verification."
16. Furthermore, [REDACTED]. For example, Norristown's records pertaining
to Complainant [REDACTED]. Either the response to the LOI stating that
the order would be cancelled and the customer not billed for
undeliverable email is inaccurate or Norristown internally recorded
"undeliverable email" as the reason for cancellation when the actual
reason for cancellation was that the consumer discovered the
unauthorized charges and complained.
17. Norristown's success in what appears to be a constructively fraudulent
enterprise seems to rely on the fact that individuals and businesses
the Company enrolled in its service failed to notice the unauthorized
charges in their multipage telephone bills and so simply proceeded to
pay them, often unaware that they contained charges from an entity
other than their own telephone company. The charges were often listed
on the last pages of the bill and/or did not contain clear
descriptions of the services provided. It would be difficult for
someone who had never heard of Norristown or "USBI" (the billing
aggregator) to know that there were unauthorized charges from another
company on his or her telephone bill.
18. If and when consumers ever discovered the charges, they were required
to expend significant time and effort to attempt to have charges
removed from their bills. In many cases we reviewed, Norristown made
it difficult for consumers to cancel the service and obtain full
refunds of the unauthorized charges. For example, Complainant
[REDACTED]. Complainant [REDACTED].
19. In other cases, Norristown only offered consumers a partial refund.
For instance, Complainant [REDACTED]. Complainant [REDACTED].
Complainant [REDACTED].
20. Based on the record, we conclude that Norristown apparently has
willfully and repeatedly placed, or caused to be placed, charges on
complainants' telephone bills that they never authorized. The facts
suggest that Norristown engaged in this conduct deliberately. To the
extent it did not, we find that Norristown either knew, or reasonably
should have known, through numerous customer inquiries and complaints
that many of its customers had not authorized service. Norristown
nevertheless proceeded to charge these consumers for months and
sometimes years. Norristown's dismissive responses to the consumer
complaints is further evidence that it apparently is deliberately
billing consumers for services they did not authorize. Accordingly, we
find that Norristown's cramming constitutes an unjust and unreasonable
practice and demonstrates apparent willful and repeated violations of
section 201(b) of the Act.
A. Proposed Forfeiture Pursuant to Section 503(b) of the Act
21. Section 503(b)(1) of the Act states that any person who willfully or
repeatedly fails to comply with any provision of the Act or any rule,
regulation, or order issued by the Commission, shall be liable to the
United States for a forfeiture penalty. Section 503(b)(2)(B) of the
Act authorizes the Commission to assess a forfeiture of up to $150,000
for each violation, or each day of a continuing violation, up to a
statutory maximum of $1,500,000 for a single act or failure to act by
common carriers. In determining the appropriate forfeiture amount, we
consider the factors enumerated in section 503(b)(2)(E) of the Act,
including "the nature, circumstances, extent and gravity of the
violation, and, with respect to the violator, the degree of
culpability, any history of prior offenses, ability to pay, and such
other matters as justice may require." Although the forfeiture
guidelines do not establish a forfeiture amount for unjust or
unreasonable practices, such as the imposition of unauthorized charges
on consumers' telephone bills, the guidelines do state that, ". . .
any omission of a specific rule violation from the. . . [forfeiture
guidelines]. . . should not signal that the Commission considers any
unlisted violation as nonexistent or unimportant." The Commission
retains the discretion to depart from the guidelines and issue
forfeitures on a case-by-case basis, under its general forfeiture
authority contained in section 503 of the Act.
22. In Long Distance Direct, Inc. ("LDDI"), the Commission found that the
"imposition of unauthorized charges on consumers' telephone bills is a
practice which is unjust and unreasonable within the meaning of
section 201(b) of the Act," and assessed a $40,000 penalty for each
cramming violation investigated in that case. Consistent with LDDI, we
find that each charge Norristown caused to be placed on a consumer's
bill without the consumer's authorization constitutes an independent
unjust and unreasonable practice, and thus a separate and distinct
violation of section 201(b) of the Act. There appear to be thousands
of such violations in this case for which the Commission is empowered
to assess a penalty.
23. Weighing the facts before us and taking into account the extent and
gravity of Norristown's egregious conduct, as well as its culpability
and information in the current record about its revenues, we find that
a total forfeiture amount of $1,500,000 is appropriate under the
specific circumstances of this case. As noted above, Norristown
placed unauthorized charges of at least $13.90 on nearly [REDACTED]
telephone bills over a twelve-month period alone and therefore billed
nearly $[REDACTED] to consumers over that time period through its
cramming operation. The forfeiture clearly must exceed this amount in
order to serve as an adequate deterrent and reflect the apparently
intentional nature of Norristown's conduct. We therefore propose a
forfeiture in the amount of $1,500,000. In the event Norristown
continues to engage in conduct that apparently violates section
201(b)'s prohibition against unjust and unreasonable practices, such
apparent violations could result in future NALs proposing
substantially greater forfeitures and revocation of Norristown's
operating authority. Other third-party service providers are also on
notice that practices such as those engaged in by Norristown are
unjust and unreasonable, and that we may propose more significant
forfeitures in the future as high as is necessary, within the range of
our statutory authority, to ensure that such companies do not charge
consumers for unauthorized services.
IV. CONCLUSION
24. We have determined that Norristown Telephone, LLC apparently violated
section 201(b) of the Act as identified above. We have further
determined that Norristown Telephone, LLC is apparently liable for a
forfeiture in the amount of $1,500,000.
V. Ordering Clauses
25. Accordingly, IT IS ORDERED, pursuant to section 503(b)(2)(B) of the
Communications Act of 1934, as amended, 47 U.S.C. S: 503(b)(2)(B), and
section 1.80 of the Commission's rules, 47 C.F.R. S: 1.80, that
Norristown Telephone, LLC is hereby NOTIFIED of this APPARENT
LIABILITY FOR A FORFEITURE in the amount of $1,500,000, for willful
and repeated violations of section 201(b) of the Act, 47 U.S.C. S:
201(b).
26. IT IS FURTHER ORDERED that, pursuant to section 1.80 of the
Commission's rules, within thirty (30) days of the release date of
this Notice of Apparent Liability for Forfeiture, Norristown
Telephone, LLC SHALL PAY the full amount of the proposed forfeiture or
SHALL FILE a written statement seeking reduction or cancellation of
the proposed forfeiture.
27. Payment of the forfeiture must be made by check or similar instrument,
payable to the order of the Federal Communications Commission. The
payment must include the NAL/Account Number and FRN referenced above.
Payment by check or money order may be mailed to Federal
Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000.
Payment by overnight mail may be sent to U.S. Bank - Government
Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
63101. Payment by wire transfer may be made to ABA Number 021030004,
receiving bank TREAS/NYC, and account number 27000001. For payment by
credit card, an FCC Form 159 (Remittance Advice) must be submitted.
When completing the FCC Form 159, enter the NAL/Account number in
block number 23A (call sign/other ID), and enter the letters "FORF" in
block number 24A (payment type code). Norristown Telephone, LLC will
also send electronic notification to Johnny.Drake@fcc.gov on the date
said payment is made. Requests for full payment under an installment
plan should be sent to: Chief Financial Officer -- Financial
Operations, 445 12th Street, S.W., Room 1-A625, Washington, D.C.
20554. Please contact the Financial Operations Group Help Desk at
1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
regarding payment procedures.
28. The written statement, if any, must be mailed both to: Marlene H.
Dortch, Secretary, Federal Communications Commission, 445 12th Street,
SW, Washington, DC 20554, ATTN: Enforcement Bureau -
Telecommunications Consumers Division; and to Richard A. Hindman,
Division Chief, Telecommunications Consumers Division, Enforcement
Bureau, Federal Communications Commission, 445 12th Street, SW,
Washington, DC 20554, and must include the NAL/Acct. No. referenced in
the caption. Documents sent by overnight mail (other than United
States Postal Service Express Mail) must be addressed to: Marlene H.
Dortch, Secretary, Federal Communications Commission, Office of the
Secretary, 9300 East Hampton Drive, Capitol Heights, MD 20743. Hand or
messenger-delivered mail should be directed, without envelopes, to:
Marlene H. Dortch, Secretary, Federal Communications Commission,
Office of the Secretary, 445 12th Street, SW, Washington, DC 20554
(deliveries accepted Monday through Friday 8:00 a.m. to 7:00 p.m.
only). See www.fcc.gov/osec/guidelines.html for further instructions
on FCC filing addresses.
29. The Commission will not consider reducing or canceling a forfeiture in
response to a claim of inability to pay unless the petitioner submits:
(1) federal tax returns for the most recent three-year period; (2)
financial statements prepared according to generally accepted
accounting practices; or (3) some other reliable and objective
documentation that accurately reflects the petitioner's current
financial status. Any claim of inability to pay must specifically
identify the basis for the claim by reference to the financial
documentation submitted.
30. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability
for Forfeiture shall be sent by Certified Mail Return Receipt
Requested and First Class mail to Norristown Telephone Company, LLC,
attention: Steven A. Augustino, Kelly Drye & Warren, LLP, Washington
Harbour, Suite 400, 3050 K Street, N.W., Washington, D.C. 20007-5108.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
Norristown's principal address is 470 Norristown Road, Suite 201, Blue
Bell, Pennsylvania 19422. Thomas Glynn is listed as Norristown's President
and CEO. Frank Scardino is listed as the "Managing Member" of Norristown.
Accordingly, all references in this NAL to "Norristown" also encompass Mr.
Glynn and Mr. Scardino and all other principals and officers of this
entity, as well as the corporate entity itself. Mr. Scardino also owns
FreeSpark, LLC, a company that provides marketing and sales support for
Norristown. Main Street Telephone Company, which is the subject of another
enforcement action we take today, is owned by the same individuals, has
the same address, telephone number, and fax number as Norristown, and the
same "regulatory compliance" contact.
47 U.S.C. S: 201(b).
See "BBB Issues Warning on Web Companies Linked to Adept Results," Nov.
11, 2009,
http://wisconsin.bbb.org/article/bbb-issues-warning-on-web-companies-linked-to-adept-results-13501.
See Letter from Richard A. Hindman, Chief, Telecommunications Consumers
Division, Enforcement Bureau, FCC, to Norristown Telephone Company, LLC
(Mar. 15, 2011) ("LOI").
See Letter from Steven A. Augustino, Counsel for Norristown Telephone
Company, LLC, to Kimberly A. Wild, Assistant Division Chief,
Telecommunications Consumers Division, Enforcement Bureau, FCC, (Apr. 14,
2011) ("Response to LOI").
See Response to LOI at 7. "Dial-around" long distance service allows a
telephone subscriber to bypass (i.e., dial around) the subscriber's
preselected long distance telephone carrier, if any, and instead use the
dial-around carrier's long distance service for a particular telephone
call. For each telephone call, the subscriber must use the dial-around
carrier's number and, in some instances, enter a PIN to connect the call.
Id.
Id.
Id.
Id. at 11. [REDACTED]. Id.
Id. at 10.
Id.
Norristown provided a spreadsheet listing a total of [REDACTED] complaints
but provided the supporting documentation for only [REDACTED] of them. The
[REDACTED] complaints provided by Norristown were received by the company
in writing or by email.
Id.
Id. at 13-14.
Id. at 14-15.
Id.
47 U.S.C. S: 201(b).
See Long Distance Direct, Inc. Apparent Liability for Forfeiture,
Memorandum Opinion and Order, 15 FCC Rcd 3297, 3302, P: 14 (2000) ("LDDI
Forfeiture Order") (finding that the company's practices of cramming
membership and other unauthorized fees on consumer telephone bills was an
unjust and unreasonable practice in connection with communication
service).
Indeed, we note that much of the identifying information Norristown
requests of a person when signing up for its long distance service - name,
address, email address, telephone number, and date of birth - can be
obtained through the purchase of aggregated lists of consumers that are
commercially sold or from free internet websites such as whitepages.com.
Nothing within Norristown's sign-up webpage prevents the individual who is
inputting the data from using someone else's identifying information or
otherwise falsifying that data. If the person signing up for the
Norristown service inputs someone else's telephone number, the person
associated with that telephone number will be billed by Norristown
regardless of whether the other information in the application is correct.
Complaint from [REDACTED]. See also Complaint from [REDACTED].
Complaint from [REDACTED].
Complaint from [REDACTED]. Norristown recorded the reason for the
cancellation as [REDACTED].
Complaint from [REDACTED].
Complaint from [REDACTED]. Norristown recorded the reason for the
cancellation as [REDACTED].
Complaint from [REDACTED]. See also Complaint from [REDACTED].
Complaint from [REDACTED].
The number of billed customers per month during the twelve-month period
ending April 1, 2011 fluctuated from [REDACTED] to [REDACTED]. Response to
LOI at 8.
Id. at 8-9. Norristown went on to say that [REDACTED]. Id.
See Response to LOI at 13.
Despite Norristown's contention that the order is only accepted if the
last name, address, and telephone number match, see Response to LOI at 14,
in many cases the names and addresses of the person "authorizing" the
service do not match the telephone number and are not the name and address
of the person billed for the service. See, e.g., [REDACTED]. The fact that
the name and address in Norristown's records do not match the name and
address of the person billed for the service shows that even a cursory
examination of the authorization would have determined that it was
invalid. Nevertheless, because the so-called authorizations contain names
and addresses that are publicly available information, matching the billed
party's name and address is no indication that the authorization is valid.
See, e.g., Complaint from [REDACTED].
Response to LOI at 16.
See Response to LOI at 14 ("If the first email (the "Confirmation Email")
is deemed to be undeliverable, then the order is cancelled.")
Complaint from [REDACTED]. See also Complaint from [REDACTED]; Complaint
from [REDACTED]; Complaint from [REDACTED].
A practice that "convey[s] insufficient information as to the company's
identity, rates, practices, and range of services" may constitute a
violation of section 201(b). See Telecommunications Research & Action
Center & Consumer Action, 4 FCC Rcd 2157, 2159 P: 14 (Com.Car.Bur. 1989).
Complaint from [REDACTED]. See also Complaint from [REDACTED]; Complaint
from [REDACTED]; Complaint from [REDACTED].
Complaint from [REDACTED].
See Complaint from [REDACTED]. See also Complaint from [REDACTED].
See Complaint from [REDACTED]; see also Complaint from [REDACTED].
See Complaint from [REDACTED].
47 U.S.C. S: 503(b)(1)(B). See also 47 C.F.R. S: 1.80(a)(2).
47 U.S.C. S: 503(b)(2)(B). See also 47 C.F.R. S: 1.80(b)(2). In 2008, the
Commission amended section 1.80(b)(2) of the rules, 47 C.F.R. S:
1.80(b)(2), to increase the maximum forfeiture amounts in accordance with
the inflation adjustment requirements contained in the Debt Collection
Improvement Act of 1996, 28 U.S.C. S: 2461. See Amendment of Section 1.80
of the Commission's Rules and Adjustment of Forfeiture Maxima to Reflect
Inflation, 23 FCC Rcd 9845, 9847 (2008) (adjusting the maximum statutory
amounts for common carriers from $130,000/$1,300,000 to
$150,000/$1,500,000).
47 U.S.C. S: 503(b)(2)(E).
See Forfeiture Policy Statement and Amendment of Section 1.80 of the Rules
to Incorporate the Forfeiture Policy Guidelines, Report and Order, 12 FCC
Rcd 17087, 17099, P: 22 (1997) ("Forfeiture Policy Statement"); recon.
denied, 15 FCC Rcd 303 (1999).
Forfeiture Policy Statement, 12 FCC Rcd at 17099, P: 22.
See Long Distance Direct, Inc., Notice of Apparent Liability for
Forfeiture, 14 FCC Rcd 314, 333, P: 25 (1998).
Id. at 337, P: 30.
As noted in the text, Norristown apparently caused unauthorized charges to
be placed on more than [REDACTED] bills dated between April 2010 and April
2011. More than [REDACTED] of these bills date from June 2010 - within one
year of the instant NAL - and thus remain actionable under the statute of
limitations set forth in section 503(b)(6)(B) of the Act. 47 U.S.C. S:
503(b)(6)(B).
The $1.5 million penalty we propose is the equivalent to applying a
$40,000 penalty to 38 violations, but as indicated above, the record shows
that Norristown's conduct involves a considerably higher number of
violations during the actionable time period.
47 C.F.R. S: 1.80.
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