Senate Bill S7082B

                                 BILL NUMBER:  S7082

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


 PURPOSE :
To prohibit the imposition of any charge or fee on the telephone bill
of a consumer when such fee is imposed by a third party, without the
consent of the consumer.

 SUMMARY OF PROVISIONS :
Sections 92 and 94 of the Public Service Law are amended to prohibit
third party billing on telephone bills without consumer consent.

 EXISTING LAW :
New York State Law does not specifically ban third party billing on
telephone bills without the consent of the consumer.

 JUSTIFICATION :
Concerns have risen over consumers being victimized by a practice
known al "cramming." Cramming is a practice where a company places
unauthorized charges for telephone and non~telephone related services
on your local telephone bill. Some of these charges may appear on your
telephone bill in terms that do not clearly state what service was
              

provided, such as "enhanced services," "access," "activation," or
"minimum usage fees." Some of the ways consumers become cramming
victims are through sweepstakes or contest entry forms; advertisements
for information or entertainment services that are available: 900
numbers; and/or free offers that trigger an automatic sign-up for a
service such as "voice mail," along with a monthly service fee. Or
company telemarketers sometimes offer a free trial without explaining
that consumers would have to take certain steps to avoid future
charges. Companies may even doctor tape recordings to make it appear
that consumers had agreed to pay for services that they did not. The
possibilities are nearly endless on how these unauthorized charges
wind up on a local telephone bill, particularly for anyone who does
any Internet shopping. Often a consumer has no clue what triggered the
vaguely described charges and likely never intentionally agreed to
them. This is not uncommon. Cramming charges are often disguised on
local telephone bills as everyday phone services and explained in
general terms such as: activation; membership; minimum usage fees;
enhanced services; equipment deposits; calling plans; travel service
and discount packages; and adult entertainment chat lines.
Unfortunately, consumers often do not know they have been crammed
until the name of a company that they do not recognize, charges for
services that they did not order and it appears on their local
telephone bill. Even then they may not initially focus on the charge
on their bill.

Historically, the federal government and states tried to address this
issue back in the mid to late 1990s when consumers complained about
cramming practices. It was considered back then one of the top five
consumer fraud scams and New York was a state where cramming was
identified as a huge problem. Back then, the Federal Communications
Commission (FCC) worked with the telecommunications industry to enact
"guidelines" to combat this practice. New York State worked with the
industry as well and came up with Cramming "guidelines." However, we
have been made aware through complaints that the practice of cramming
has not been effectively terminated and consumers are being left to
deal with these issues on their own. What seems to be happening is
consumers are turning to their local phone provider but most often
have to fend for themselves against these third party billers. The
consumers are ending up with a handful of pamphlets instead of their
money back or ability to get the charges wiped off their phone bill.
Currently, local carriers have the authority to remove the charges,
but it often requires the customer to contact the crammer first to try
to resolve the dispute which is burdensome on the consumer.

This bill seeks to stop this practice from happening in the first
place so that consumers are not stuck with the onerous task of trying
to get charges off their bills for services they did not request in
the first place.

 LEGISLATIVE HISTORY :
This is a new bill.

 FISCAL IMPLICATIONS :
To be determined.

 EFFECTIVE DATE :
This act shall take effect immediately, except that section one of
this act shall take effect on the one hundred eightieth day after it
shall have become a law.

                                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.