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Before the
Federal Communications Commission
Washington, D.C. 20554
)
)
In the Matter of File No. EB-10-TC-464
)
Cheap2Dial Telephone, LLC NAL/Acct. No.: 201132170020
)
Apparent Liability for Forfeiture FRN: 0017385527
)
)
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 Cheap2Dial Telephone, LLC ("Cheap2Dial" 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. Over a twelve-month period,
Cheap2Dial billed as many as 18,571 consumers monthly, during which
time no more than 22 consumers (or 0.1 percent) ever actually used its
service. Based upon our review of the facts and surrounding
circumstances, we find that Cheap2Dial is apparently liable for a
proposed forfeiture in the amount of three million dollars
($3,000,000).
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 Cheap2Dial, 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
Cheap2Dial on September 23, 2010, by issuing a letter of inquiry to
the Company requesting information and documents relating to its
charges for long distance service. In its initial response, dated
November 8, 2010, Cheap2Dial represented, among other things, that it
provides domestic interexchange telecommunications service on a resale
basis through two "dial-around" service plans: the Max Minutes Plan,
which offers 358 minutes of domestic interexchange calling per month
for $13.97, and the Max Minutes Plus Plan, which provides 383 minutes
of domestic interexchange calling per month for $14.97. Cheap2Dial
also charges consumers monthly a maximum billing fee of $5.95 and
applicable Universal Service Fund charges.
4. Cheap2Dial's process for billing consumers involves three parties:
Cheap2Dial; its billing aggregator, Billing Solutions Group, Limited
d/b/a Billing Concepts ("Billing Concepts"); and the LEC that issues
the bill to the consumer. Billing Concepts uses the name "USBI" in
billing for long distance services. The LEC is compensated by Billing
Concepts for placing the charges on the consumers' bills; Billing
Concepts is paid by Cheap2Dial to manage billing requests and payments
between the LEC and Cheap2Dial; and Cheap2Dial ultimately receives the
money collected from the consumers who pay the charges. Generally,
carriers supply only a consumer's telephone number and the amount to
be charged when directing the LEC to place the charge on the
consumer's telephone bill. Proof of consumer authorization is not
provided or required.
5. Cheap2Dial markets its service exclusively on the Internet, using
banners and webpages posted on various Internet sites. Online
enrollment forms used to sign up customers allow for the input of the
consumer's first name, last name, address, email address, home
telephone number, and date of birth. Below the enrollment form is a
summary of the terms of use, including a statement that the consumer
will receive monthly recurring charges on his or her local telephone
bill until the plan is cancelled.
6. As part of its investigation, the Bureau examined more than 125
complaints that had been filed by consumers about Cheap2Dial's
service. These included ones that had been filed not only with the
FCC, but also with state regulatory authorities, the Better Business
Bureau, or with Cheap2Dial directly. All of the complainants contended
that Cheap2Dial had charged them for service without their
authorization.
7. These complaints notwithstanding, Cheap2Dial claims that it has
"strict policies and procedures for verifying all service requests
prior to activating and billing any customer account." According to
Cheap2Dial, it "performs a series of tests to verify the enrollment
information provided by the potential customer." The Company states
that these procedures include validating enrollment information
through outside third-party database vendors."
8. Cheap2Dial responded to consumer complaints with one of four different
letters providing different explanations to consumers about how
Cheap2Dial purportedly verified their enrollment. In one, the consumer
is told that his or her first or last name was accurately matched with
the address and telephone number provided. In the second, the consumer
is told that his or her name was accurately matched with the address
and telephone number provided and that the IP address used at sign-up
passed Cheap2Dial's validation process and fell within the 100 mile
radius of the address. The third letter says nothing about the address
and telephone number matching, but notes that the IP address passed
the Company's validation process and fell within the 100 mile radius
of the enrollment address. This letter also provides the IP address
used to sign up for service, and recommends that the complainant
contact the Internet service provider of that address to determine who
fraudulently used his or her telephone number during the sign-up
process. The fourth letter says nothing about the address, telephone
number, or IP address but provides the sign-up date and time and the
IP address used during the sign-up, and recommends that the
complainant contact the Internet service provider of that address to
determine who fraudulently used the customer's telephone number during
the sign-up process.
9. Cheap2Dial states that following enrollment, it sends customers
welcome messages via email and postal mail, using the email and postal
addresses provided on the enrollment forms. The consumer is not
required to confirm that the emails were received or to otherwise
respond to the emails before Cheap2Dial begins charging for the
service.
III. DISCUSsION
A. Violation of Section 201(b) of the Act
10. 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).
11. We find that Cheap2Dial has willfully and repeatedly placed, or caused
to be placed, charges on consumers' telephone bills for services the
consumer did not request or authorize. As indicated above, each of the
more than 125 consumer complaints that the Bureau reviewed - whether
they were filed with the FCC, state regulatory authorities, the Better
Business Bureau, or with Cheap2Dial directly - contends that
Cheap2Dial charged consumers for service without their authorization.
The complainants consistently state they did not sign up for
Cheap2Dial's service, did not have any contact with Cheap2Dial prior
to discovering the charges, and in most cases, do not even know the
person whom Cheap2Dial 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 Cheap2Dial. Below are
illustrative, not exhaustive, examples of some of the consumers who
were charged by Cheap2Dial via their telephone bills:
12. Complainant S. Lovelette. Complainant Lovelette lives in St. Louis,
Missouri. AT&T is her landline telephone service provider. In August
of 2010, she noticed a charge from USBI on her AT&T bill. She learned
that the USBI charge was for Cheap2Dial's services and that she had
been charged each month by Cheap2Dial since July of 2008. Ms.
Lovelette had assumed the charge was from the state or federal
government. She contacted Cheap2Dial and was told she signed up online
in 2008. Cheap2Dial sent her a copy of an online enrollment form. "The
only valid information on the confirmation was my home telephone #!
The name, address, email, and birth date were all false. In fact, they
didn't match my personal information at all! I asked how they verify
this information is accurate and that the person enrolling on-line is
authorized to make changes for my account and I was informed that they
have procedures in place and when the enrollment was performed it
passed their security verification." Cheap2Dial offered to credit her
for three months if she first mailed in the billing statements. Ms.
Lovelette was told she could not request a credit of more than 6
months. Cheap2Dial's own records showed that the IP address used to
sign up for service was located in Festus, Missouri, not Saint Louis,
Missouri where Ms. Lovelette resides. Cheap2Dial told Ms. Lovelette
that the IP address used at signup passed its validation process and
fell within the 100 mile radius of the enrollment address. Cheap2Dial
recommended that Ms. Lovelette contact the Internet service provider
to determine who fraudulently used her phone number during the sign-up
process. Cheap2Dial charged Ms. Lovelette for 25 months of service
even though she never authorized or used its service.
13. Complainant A. Newman. Complainant Newman lives in Hilton, New York.
His landline telephone service provider is Frontier. In November of
2010, he noticed a charge on his Frontier bill from Cheap2Dial. He
later discovered he had been charged by Cheap2Dial for $16.28 a month
for over twelve months. When he contacted Cheap2Dial, the Company
initially agreed to refund just six months of charges and only if Mr.
Newman faxed the last six months of his phone bills. The name, home
address, and email address on Cheap2Dial's enrollment form did not
match Mr. Newman's personal information and the IP address used to
sign up for service is located in Fairpoint, New York, not Hilton, New
York. Only after Mr. Newman filed a complaint with the Better Business
Bureau did Cheap2Dial refund $228.01.
14. Complainant A. Butkevick. Complainant Butkevick's medical practice in
Pearland, Texas has long distance service with AT&T. Mr. Butkevick
discovered his business phone number had been charged by Cheap2Dial
since August of 2008. Mr. Butkevick never signed up for service with
Cheap2Dial. Cheap2Dial refused to refund any of the charges, despite
the fact that its records showed another individual's name on the
account. In addition, Billing Concepts' records revealed that the
phone number belonged to Mr. Butkevick's medical practice, rather than
to the person identified on Cheap2Dial's enrollment form. Cheap2Dial's
verification procedures also showed that the IP address used to sign
up for service was located in Mansfield, Texas. Nevertheless,
Cheap2Dial charged him for 27 months for a service that Mr. Butkevick
never authorized or used. After filing a complaint with the Public
Utility of Texas, Mr. Butkevick finally received a refund of $435.54.
15. Complainant B. Yeager. Complainant Yeager works for a radio
broadcasting company in Overland Park, Kansas. The company has
telephone service with Qwest. Ms. Yeager discovered that Cheap2Dial
had placed charges on the company's Qwest phone bill for several
months. When Ms. Yeager contacted Cheap2Dial and asked it to provide
proof of consent, "they provided an [e]nrollment [i]nformation
`confirmation email' that was entirely fraudulent." Cheap2Dial's
records did not match the company's name, business address or email
address. Ms. Yeager explained that the telephone line Cheap2Dial was
billing was for a radio tower in the middle of a rural field and is
"strictly for the use of monitoring the radio broadcast and therefore
is NEVER answered by a person." Despite charging the company for five
months of service, Cheap2Dial offered to refund just two months of
charges. In its response to the complaint, Cheap2Dial told Ms. Yeager
that the IP address used during the sign-up was located in Lexington,
Nebraska, despite the fact that Ms. Yeager's company is in Kansas.
16. Complainant Z. Schulman. Complainant Schulman is 82 years old and
lives in Cincinnati, Ohio. She has telephone service with Cincinnati
Bell. When she discovered that she had been charged by Cheap2Dial
through her Cincinnati Bell telephone bill since April of 2009, Ms.
Schulman contacted Cheap2Dial to request a refund. Cheap2Dial told her
she had signed up for service, even though the information on
Cheap2Dial's enrollment form did not match that of Ms. Schulman. The
name on the enrollment form was not hers, and the home address and
email address did not belong to her. After several phone calls to
Cheap2Dial, Ms. Schulman was instructed by a Cheap2Dial representative
to fax in copies of her telephone bills. The representative suggested
Ms. Schulman go directly to the Cincinnati Bell office to get the
print-outs she needed. Ms. Schulman went to the main Cincinnati Bell
office to retrieve copies of her telephone bills for April and May
2009. Ms. Schulman made a second trip to the Cincinnati Bell office to
obtain copies of her June, July, August and September 2009 bills.
After Ms. Schulman faxed in copies of her telephone bills, Cheap2Dial
initially agreed to refund six months of charges, despite having
charged her without her authorization for 13 months. Not until Ms.
Schulman hired an attorney to try to recoup her money did Cheap2Dial
agree to issue a refund of $243.33.
17. The complainants' contention that Cheap2Dial "crammed" charges for its
dial-around long distance service on their bills is corroborated by
the fact that, between March 2010 and February 2011, Cheap2Dial placed
charges on over 141,000 monthly telephone bills, knowing that just 22
consumers were using the service at any one time. The number of
consumers Cheap2Dial billed per month during this period fluctuated
from 18,571 to 7,885; however, just 22 consumers (or 0.1 percent) were
recorded ever using the service - compelling evidence that few if any
of the consumers being billed had actually ordered service or were
aware that they were being charged for it.
18. To the extent that it actually uses them, Cheap2Dial's validation and
verification processes are clearly inadequate to confirm that the
person who "enrolled" in one of its plans, i.e., the one whom
Cheap2Dial will charge for service, actually authorized the service.
As indicated, Cheap2Dial asserts that one of the ways it confirms
customer authorization is to verify that the IP address used to sign
up for service is within 100 miles of the telephone customer's billing
address. On its face, this in no way verifies that the person being
billed for a service actually ordered the service. In fact, in many
cases, as indicated above, the name and address in Cheap2Dial'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
service. The only information that consistently belonged to the
customer whom the Company charged was, in fact, his or her telephone
number. Based on our review of the record, it appears that any
validation procedure that Cheap2Dial 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 Cheap2Dial's dial-around
service.
19. Cheap2Dial's claims that it "verifies" a service request by sending
welcome messages via email 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 Cheap2Dial's service. Indeed, many of the complainants
assert they never received any emails or other communications from
Cheap2Dial regarding its long distance service. This would not be
surprising given that, as noted above, the email address in
Cheap2Dial's records is generally not the consumer's. Similarly, the
welcome message sent to the postal address provided on the enrollment
form would not reach the consumer when that address does not belong to
the billed customer. 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, Cheap2Dial. On these facts, the mere act of sending
an email or mail without requiring a response from a consumer thus is
not sufficient to "verify" that the consumer, in fact, ordered
Cheap2Dial's service in the face of the consumer's contrary assertion.
20. Cheap2Dial'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 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 Cheap2Dial or "USBI" (the billing
aggregator) to know that there were unauthorized charges from another
company on his or her telephone bill.
21. If and when consumers ever discovered Cheap2Dial's charges, the
Company required them to expend significant time and effort to attempt
to have charges removed from their bills. For example, in many cases
we reviewed, Cheap2Dial made it difficult for consumers to obtain full
refunds of unauthorized charges, and only offered consumers a partial
refund. In other cases, refunds were not provided until after the
consumer filed a complaint with a state or federal regulatory
authority. For example, Cheap2Dial charged Complainant Lovelette for
25 months. The Company provided no evidence that complainant
authorized or used the service, yet when she contacted Cheap2Dial to
have the charges removed, she was told the company would not credit
the charges beyond six months. Only after Ms. Lovelette filed a
complaint with the Missouri Attorney General's office was Ms.
Lovelette given a full refund of the charges. Similarly, Cheap2Dial
refused to issue a refund to Complainant Smith until she sent in
copies of her phone bills and requested the refund in writing.
Numerous other complainants say they were told by Cheap2Dial's
customer service representatives that someone in the home had ordered
the services and that the enrollment form was proof that the service
was authorized. Many consumers were instructed to first review the
enrollment "contract" and then submit their complaints in writing
before any refund would be issued. Others were forced to make several
calls to Cheap2Dial and to speak with several employees before any
refund was issued. For example, Complainant Bowling explained:
[First] they said and I quote[,] We don't refund money. And if you
weren[']t smart enough to look at your bill that wasn't their fault. After
another call or two they said they would refund me 6 months. If I could
prove each bill date I was billed...So when I called USBI/Cheap2Dial back
and said I now can prove bill dates and that I wanted the refund of
$313.88[,] as we were speaking and I asked again[,] they hung up on me.
22. Based on the record, we conclude that Cheap2Dial apparently has
willfully and repeatedly placed, or caused to be placed, charges on
complainants' telephone bills that they never authorized. The facts
suggest that Cheap2Dial engaged in this conduct deliberately. To the
extent it did not, we find that Cheap2Dial either knew, or reasonably
should have known, through numerous customer inquiries and complaints
that many of its customers had not authorized service and that the
vast majority of them were not using its service - yet Cheap2Dial
nevertheless proceeded to charge these consumers for months and
sometimes years. Cheap2Dial'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 Cheap2Dial'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
23. 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.
24. 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 Cheap2Dial 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.
25. Weighing the facts before us and taking into account the extent and
gravity of Cheap2Dial'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 $3,000,000 is appropriate under the
specific circumstances of this case. As noted above, Cheap2Dial
placed unauthorized charges of at least $13.97 on more than 141,000
telephone bills over a twelve-month period alone and therefore billed
nearly $2,000,000 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 Cheap2Dial's conduct. We therefore propose a
forfeiture in the amount of $3,000,000. In the event Cheap2Dial
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 Cheap2Dial's
operating authority. Other third-party service providers are also on
notice that practices such as those engaged in by Cheap2Dial 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
26. We have determined that Cheap2Dial Telephone, LLC apparently violated
section 201(b) of the Act as identified above. We have further
determined that Cheap2Dial Telephone, LLC is apparently liable for a
forfeiture in the amount of $3,000,000.
I. ORDERING CLAUSES
27. Accordingly, IT IS ORDERED that, pursuant to section 503(b) of the
Act, as amended, 47 U.S.C. S: 503(b)(5), and section 1.80 of the
Commission's rules, 47 C.F.R. S: 1.80, Cheap2Dial Telephone, LLC is
hereby NOTIFIED of this APPARENT LIABILITY FOR A FORFEITURE in the
amount of $3,000,000, for willful and repeated violations of section
201(b) of the Communications Act of 1934, as amended, 47 U.S.C. S:
201(b).
28. 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, Cheap2Dial
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.
29. 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). Cheap2Dial 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.
30. 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.
31. 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.
32. 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 Cheap2Dial Telephone, LLC,
Attention: Mitchell F. Brecher, Greenberg Traurig, LLP, 2101 L Street,
N.W., Suite 1000, Washington, D.C. 20037.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
Cheap2Dial's principal address is 4075 Linglestown Road, Harrisburg,
Pennsylvania 17112. Barry Rynearson is the owner and is listed as
Cheap2Dial's Chief Executive Officer. Accordingly, all references in this
NAL to "Cheap2Dial" also encompass Mr. Rynearson and all other principals
and officers of this entity, as well as the corporate entity itself.
Cheap2Dial's business operations are managed by Adept Results, Inc.
("Adept Results"). Mr. Rynearson has a 9.75% interest in Adept Results.
The owners of Adept Results are associated with another telecommunications
carrier, VoiceNet Telephone, LLC ("VoiceNet"), which is the subject of
another enforcement action we take today. Mr. Rynearson is the Chief
Financial Officer of Adept Results and is also the Chief Executive Officer
of VoiceNet, which is owned by Cathy Burger-Gray. The President,
Secretary, and Treasurer of Adept Results is Joshua Gray.
47 U.S.C. S: 201(b).
For example, Adept Results also markets cosmetics and other products, the
charges for which are placed on consumers' telephone bills. 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 Kimberly A. Wild, Assistant Division Chief,
Telecommunications Consumers Division, Enforcement Bureau, Federal
Communications Commission, to Cheap2Dial Telephone, LLC (Sept. 23, 2010)
("LOI"). The Bureau issued a second LOI to Cheap2Dial on February 25,
2011. See Letter from Kimberly A. Wild, Assistant Division Chief,
Telecommunications Consumers Division, Enforcement Bureau, Federal
Communications Commission, to Mitchell F. Brecher, Counsel to Cheap2Dial
Telephone, LLC (Feb. 25, 2011) ("Second LOI").
See Letter from Mitchell F. Brecher, Counsel for Cheap2Dial Telephone,
LLC, to Kimberly A. Wild, Assistant Division Chief, Telecommunications
Consumers Division, Enforcement Bureau, FCC (Nov. 8, 2010) ("Response to
LOI"). Cheap2Dial's response to the Second LOI was received on March 28,
2011. See Letter from Mitchell F. Brecher, Counsel for Cheap2Dial
Telephone, LLC, to Kimberly A. Wild, Assistant Division Chief,
Telecommunications Consumers Division, Enforcement Bureau, FCC (Mar. 28,
2011) ("Response to Second LOI").
See Response to LOI at 3-4. "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 phone call.
For each phone call, the subscriber must use the dial-around carrier's
number and, in some instances, enter a PIN to connect the call.
See id. at 4. Cheap2Dial contends that it receives certain marketing and
account management services from Adept Results. It appears that Adept
Results, in fact, handles the vast majority of Cheap2Dial's business
operations, including customer service, call center needs, banking and
accounting, and legal services. The underlying carrier whose service
Cheap2Dial resells is "TCS Communications Solutions, LLC." See id. at 6.
Id. at Attachment 2.
See Letters to FCC responding to consumer complaints.
Id.
Id.
Id.
See 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
services).
We note that Cheap2Dial provided only those complaints it received in
writing or via email. It did not provide complaints Cheap2Dial may have
received over the telephone.
See, e.g., Complaint from D. Law.
See Complaint from S. Lovelette.
See Complaint from A. Newman.
See Complaint from A. Butkevick.
See Complaint from B. Yeager.
See Complaint from Z. Schulman.
See Response to Second LOI at Section II, Tab A and Tab B.
Id.
See, e.g., Complaint from A. McDavid ("I never received a letter, email
$25 Walmart gift card or any other correspondence from Cheap2Dial
verifying that I ordered the service. The charge just appeared on my phone
bill one month . . . My last name, address and phone number can be found
in our local phone book. I would not call that verification! Except for
the first letter of the first name on your so called `letter of
authorization' the first name is not even close to mine. The email address
is not mine nor is the birthday correct."); Complaint from D. Wolfe (Name
and address on Cheap2Dial's enrollment form did not match the customer's.
Having contacted Cheap2Dial about the unauthorized charges, Ms. Wolfe
"asked [the customer service representative] if they didn't run some sort
of computer check on applications to make sure the phone number and name
matched. Her strange reply raised questions in my mind. She said, `Our
data bases showed that it was a valid address in Waxhaw and a valid phone
number in Waxhaw."); Complaint from T. Bowling ("They said on 11/26/2008
JAMES COOPER submitted an application via the internet to request these
services. I have a copy of this application. I don[']t know a JAMES COOPER
nor in the 15 years I've lived here with this # has one ever been here.
The only thing on the app. that matches anything to do with my home is my
phone #."); Complaint from C. Jorasch ("They said they perform `extensive
validation' on the sign up form but the information they collected was an
unknown person with a different address, birthday, email, etc. from the
phone number where it was charged.").
See Letter to FCC responding to customer complaint.
See, e.g., Complaint from R. Meade (on the application Cheap2Dial
provided, "[t]he name was misspelled, the birth date was inaccurate, and
the email address provided was not mine."); Complaint from J. Benedict
("When the consumer contacted USBI they stated they had proof he purchased
these services. They sent the consumer a false email with all incorrect
information."); Complaint from J. Treat ("I called Qwest the day I
received the bill. They said I signed up for it on the internet. I do not
have access to [e]-mail and haven't for the last 8 months").
See Letter to FCC responding to consumer complaint.
Indeed, we note that much of the identifying information Cheap2Dial
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 Cheap2Dial'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
Cheap2Dial service inputs someone else's telephone number, the person
associated with that telephone number will be billed by Cheap2Dial
regardless of whether the other information in the application is correct.
See, e.g., Complaint from V. Merryweather (person on authorization was
Hooman Hoomanian; address was not Ms. Merryweather's); Complaint from N.
Gulshad (person on authorization was Kuta Maue; address was not Mr.
Gulshad's); Complaint from W. Lowery (person on authorization was Jaleesa
Battle; address was not Ms. Lowery's); Complaint from J. Farley (person on
authorization was Paco Suave; address was not Mr. Farley's); Complaint
from K. Witte (person on authorization was Joe Barnes; address was not Mr.
Witte's); Complaint from N. Craig (person on authorization was Katrina
King; address was not Mr. Craig's); Complaint from K. Lalley (person on
authorization was Anna Baker; address was not Ms. Lalley's); Complaint
from T. Haley (person on authorization was Jen Stilwater; address was not
Mr. Haley's); Complaint from O. Coronel (person on authorization was Jason
Chen; address was not Mr. Coronel's); Complaint from B. Yeager (person on
authorization was Oscar Lara; address was not Ms. Yeager's).
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).
See Complaint from S. Lovelette; see also Complaint from W. John.
See, e.g., Complaint from K. Winslow ("[Cheap2Dial] advised me that I
would have to request in writing a copy of the LOA for the initial charges
to be returned to me and that it would take approximately 10
days...Verizon advised me if I did NOT pay these charges that they would
continue to bill me a late fee").
See, e.g., Complaint from T. Haley ("Cheap2Dial charged my AT&T bill and
will not take off the charge. They told me to go after the Jen Stilwater
for ID fraud!!! There is no Jen Stilwater. I have called for three months,
been put on hold for hours. AT&T said by FEDERAL LAW they have to let
third party charges be billed and will not give credit.").
See Complaint from T. Bowling.
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, Order, 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 Guidelines, Report and Order, 12 FCC Rcd 17087, 17099, P:
22 (1997) ("Forfeiture Policy Statement"); recon. denied, 15 FCC Rcd 303
(1999).
Id.
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, see supra P: 17, Cheap2Dial apparently caused
unauthorized charges to be placed on more than 141,000 bills dated between
March 2010 and February 2011. More than 90,000 of these bills date from
June 2010 - within one year of the date 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 $3 million penalty we propose is equivalent to applying a $40,000
penalty to 75 violations, but as indicated, see supra note 42, the record
shows that Cheap2Dial'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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Federal Communications Commission FCC 11-90
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Federal Communications Commission FCC 11-90