FCC Revises Slamming and Cramming Rules
On June 7, 2018, the Federal Communications Commission (Commission) voted to amend its rules to strengthen its ability to take enforcement action against carriers that change consumers' voice service providers without permission ("slamming") or bill them for bogus charges ("cramming"). The Commission noted that while complaints have abated somewhat in recent years, slamming and cramming continues to "cause consumers myriad problems—it deprives them of their choice of providers, can increase their monthly bills and can be difficult to fix." To address these issues, the Commission codified bans on material misrepresentations on sales calls and unauthorized charges on telephone bills, and amended the existing third-party verification (TPV) process, which involves a recorded conversation between a consumer and an independent third-party. The rule changes will go into effect on August 16, 2018.1
Background on Slamming and Cramming Rules
Section 258 of the Communications Act of 1934 (Act) prohibits slamming and states that "[n]o telecommunications carrier shall submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." The Commission's rules specify that a carrier may only submit a switch request when it has one of four possible forms of consumer confirmation: (a) a Letter of Agency; (b) an electronic authorization (a call to a toll-free number that records the caller's originating automatic number identification), (c) "[a]ny State-enacted verification procedures applicable to intrastate preferred carrier change orders only," or (d) a TPV.2
The Commission also adopted additional rules pursuant to Section 201(b), which makes it unlawful for telecommunications carriers to engage in "unjust or unreasonable" practices, and Section 258(b) of the Act to deter slamming and cramming. These rules require that a consumer's bill, among other things, be clearly organized, clearly identify the service provider, highlight any new provider, and include full and non-misleading descriptions of charges.3
Commission's Report and Order
In 2017, the Commission released a Notice of Proposed Rulemaking requesting input on proposed rules to protect consumers from slamming and cramming. After receiving several comments, the Commission adopted the Order addressing (a) misrepresentations on sales calls; (b) unauthorized charges on telephone bills; and (c) third-party verifications.4
Misrepresentations on Sales Calls: The Commission codified "a rule to prohibit material misrepresentation, including material omissions, in sales calls." The Commission stated that a codified prohibition "will provide carriers and consumers with more specific information and notice of this prohibited practice." The Commission agreed with commenters who asked that it ban only "material" misrepresentations rather than all "intentional" representations, noting that intentionality will be considered when determining forfeiture amounts. A finding of "material" misrepresentation in a sales call invalidates a consumer's authorization to change carriers, even if the carrier has some evidence of consumer authorization of a switch, such as a facially-valid TPV. A "sales call" is defined as "any telephone call in which a carrier encourages a subscriber to submit or execute a change in the subscriber's provider or telephone exchange service or telephone toll service." The Commission did not mandate recording of such calls, but noted that carriers that do not record calls will have to develop other means to rebut credible consumer allegations of misrepresentations on such calls.5
Unauthorized Charges on Telephone Bills: The Commission codified a prohibition on the placement of unauthorized charges on telephone bills. The Commission noted that although cramming has been a "long-standing" issue in its enforcement actions, the Commission had not previously codified a rule against cramming. The Commission stated that codifying the prohibition will provide "greater clarity to interested parties," and "will provide consumers with more specific information and notice of this prohibited practice."6
Third Party Verifications: The Commission stated that it was removing an unnecessary regulatory requirement that does not benefit consumers, while adopting a new measure to address abuses of the TPV process. The Commission eliminated the requirement that carriers obtain authorization for each individual service sold (e.g. intraLATA and interLATA toll service). The Commission concluded that rapid movement towards "all-distance service" has made distinctions between services less important. To address continued fraudulent abuse of the TPV process, the Commission concluded that any carrier that becomes the subject of a forfeiture order for TPV abuses "will be suspended for a period of five years from using the TPV process to confirm consumer switches."7
In addition to strengthening its requirements, the Commission reminded carriers that the Commission will continue to use its enforcement authority to "stop bad actors, including through substantial monetary penalties and revocation of Commission operating authorization."8
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© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.