BILL NUMBER:S7082A

TITLE OF BILL:
An act to amend the public service law, in relation to consumer
protections against cramming

PURPOSE OR GENERAL IDEA OF BILL:
This bill will prohibit the practice of "cramming" - that is, the addi-
tion of charges on a telephone bill by a third party without the
informed consent of the consumer.

SUMMARY OF SPECIFIC PROVISIONS:
Bill §1 amends §92-d of the Public Service Law (PSL) to add consumer
protections against cramming to the list of PSL consumer safeguards that
customers must be informed of by local exchange telephone companies.

Bill §2 adds a new PSL §92-g prohibiting telephone corporations from
permitting or facilitating the practice of cramming. "Cramming" is
defined as the inclusion or imposition of charges on a telephone bill at
the request of a third party that were not authorized by the customer
or, if authorized, were obtained through misleading or deceptive means.
Charges for goods or services (other than those provided by the tele-
phone company or its affiliates) may be billed only if the customer
explicitly consented to the nature and amount of such charges after
having received clear and conspicuous disclosure of all terms and condi-
tions. In addition, the third party or its agent must provide the
              

customer with a toll-free number and address for resolution of any bill-
ing dispute. Any charges imposed without the consumer's consent having
been obtained as provided above are declared void and unenforceable, and
the telephone corporation is required to remove them upon notice from
the customer that such charges were not authorized. The Public Service
Commission shall supervise and ensure full compliance with §92-g, and
may adopt any necessary rules and regulations, which may include addi-
tional requirements for verification of customer orders and standards
third parties must meet to be authorized to request inclusion of charges
on telephone bills. Any failure to comply by a telephone corporation may
be addressed through the complaint process in PSL §96(3) or by any other
legal means.

SUMMARY OF SPECIFIC AMENDMENTS:
The bill as originally introduced contained the same basic provisions,
which have been augmented by additional protections that other states
have enacted (in particular, in recent amendments to the Illinois
Consumer Fraud and Deceptive Business Practices Act at 815 ILCS
505/2HHH). These include the requirement for upfront provision of clear
and conspicuous disclosure to the customer and information on how the
third party vendor can be contacted to resolve any billing dispute. In
addition, §92-g is integrated with other PSL provisions (§§92-d, 96) and
a requirement for PSC reporting on the implementation of §92-g is
deleted in light of the agency's ability to require each company to
report on the same (§95).

EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
There is currently no statutory prohibition of cramming in New York
State law. As discussed below, voluntary efforts and agreements have not
been sufficiently effective in curtailing this fraudulent practice.

JUSTIFICATION:
New York and other states have recently seen a resurgence of "cramming"
complaints. Cramming refers to the inclusion on a telephone bill of
unauthorized, deceptive or misleading third-party fees or charges. These
charges are often added indirectly through a billing warehouse and can
be described in vague terms such as "enhanced services," "access,"
"activation," or "minimum usage fees."  Consumers can become cramming
victims through sweepstakes or contest entry forms, calling "900"
numbers, answering advertisements for information or entertainment
services that are available, and accepting free offers that trigger an
automatic sign-up for a service such as "voice mail," along with a
monthly service fee. Company telemarketers may offer a free trial with-
out explaining the steps the consumer would have to take to avoid future
charges, or may even doctor tape recordings to make it appear that
consumers had agreed to pay for services when in actuality they did not.
Because their monthly bills are often larger and many pages longer than
residential customers, small businesses are frequent targets of cram-
mers.

Since the 1990s, Federal and state agencies have tried to address this
issue by working with the telecommunications industry to enact voluntary
guidelines to combat the practice. The New York Attorney General's
office has also negotiated settlement agreements with some of the larger
telephone companies to address consumer complaints.  However, these
guidelines and agreements have only been partially effective, and
require constant vigilance and substantial effort by consumers to guard
against fraud. For every telephone customer who detects and successfully
fights an unauthorized charge, there are many others who pay for them
month after month without being aware of the scam.

This bill is a proactive effort to prevent the addition of fraudulent
charges to consumers' bills in the first place, to provide consumers
with the needed tools to contest instances of cramming, and to ensure
that the burden of proof is on the company seeking to add fees and
charges, and not on individual consumers.

PRIOR LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

EFFECTIVE DATE:
180th day after enactment.

                                BILL NUMBER:S7082B

TITLE OF BILL:
An act
to amend the public service law, in relation to consumer protections
against cramming

PURPOSE OR GENERAL IDEA OF BILL:
This bill will prohibit the practice of "cramming" - that is, the
addition of charges on a telephone bill by a third party without the
informed consent of the consumer.

SUMMARY OF SPECIFIC PROVISIONS:
Bill §1 amends §92-d of the Public Service Law (PSL) to add consumer
protections against cramming to the list of PSL consumer safeguards
that customers must be informed of by local exchange telephone
companies.

Bill §2 adds a new PSL §92-g prohibiting telephone corporations from
permitting or facilitating the practice of cramming. "Cramming" is
defined as the inclusion or imposition of charges on a telephone bill
at the request of a third party that were not authorized by the
customer or, if authorized, were obtained through misleading or
deceptive means. Charges for goods or services (other than those
provided by the telephone company or its affiliates) may be billed
only if the customer explicitly consented to the nature and amount of
              

such charges after having received clear and conspicuous disclosure
of all terms and conditions. In addition, the third party or its
agent must provide the customer with a toll-free number and address
for resolution of any billing dispute. Any charges imposed without
the consumer's consent having been obtained as provided above are
declared void and unenforceable, and the telephone corporation is
required to remove them upon notice from the customer that such
charges were not authorized. The Public Service Commission shall
supervise and ensure full compliance with §92-g, and may adopt any
necessary rules and regulations, which may include additional
requirements for verification of customer orders and standards
third parties must meet to be authorized to request inclusion
of charges on telephone bills. Any failure to comply by a telephone
corporation may be addressed through the complaint process in PSL
§96(3) or by any other legal means.

SUMMARY OF SPECIFIC AMENDMENTS:
The bill as originally introduced contained the same basic provisions,
which have been augmented by additional protections that other states
have enacted (in particular, in recent amendments to the Illinois
Consumer Fraud and Deceptive Business Practices Act at 815 ILCS
505/2HHH). These include the requirement for upfront provision of
clear and conspicuous disclosure to the customer and information on
how the third party vendor can be contacted to resolve any billing
dispute. In addition, §92-g is integrated with other PSL provisions

(§§92-d, 96) and a requirement for PSC reporting on the
implementation of §92-g is deleted in light of the agency's ability
to require each company to report on the same (§95).

EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
There is currently no statutory prohibition of cramming in New York
State law. As discussed below, voluntary efforts and agreements have
not been sufficiently effective in curtailing this fraudulent practice.

JUSTIFICATION:
New York and other states have recently seen a resurgence of
"cramming" complaints. Cramming refers to the inclusion on a
telephone bill of unauthorized, deceptive or misleading third-party
fees or charges. These charges are often added indirectly through a
billing warehouse and can be described in vague terms such as
"enhanced services," "access," "activation," or "minimum usage fees."
Consumers can become cramming victims through sweepstakes or contest
entry forms, calling "900" numbers, answering advertisements for
information or entertainment services that are available, and
accepting free offers that trigger an automatic sign-up for a service
such as "voice mail," along with a monthly service fee. Company
telemarketers may offer a free trial without explaining the steps the
consumer would have to take to avoid future charges, or may even
doctor tape recordings to make it appear that consumers had agreed to
pay for services when in actuality they did not. Because their
monthly bills are often larger and many pages longer than residential
customers, small businesses are frequent targets of crammers.

Since the 1990s, Federal and state agencies have tried to address this
issue by working with the telecommunications industry to enact
voluntary guidelines to combat the practice. The New York Attorney
General's office has also negotiated settlement agreements with some
of the larger telephone companies to address consumer complaints.
However, these guidelines and agreements have only been partially
effective, and require constant vigilance and substantial effort by
consumers to guard against fraud. For every telephone customer who
detects and successfully fights an unauthorized charge, there are
many others who pay for them month after month without being aware of
the scam.

This bill is a proactive effort to prevent the addition of fraudulent
charges to consumers' bills in the first place, to provide consumers
with the needed tools to contest instances of cramming, and to ensure
that the burden of proof is on the company seeking to add fees and
charges, and not on individual consumers.

PRIOR LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

EFFECTIVE DATE:
180th day after enactment.