2012-12673. Empowering Consumers To Prevent and Detect Billing for Unauthorized Charges (“Cramming”); Consumer Information and Disclosure; Truth-in-Billing Format

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

In this document, the Federal Communications Commission (FCC or Commission) adopts rules to help consumers prevent and detect the placement of unauthorized charges on their telephone bills, an unlawful and fraudulent practice commonly referred to as “cramming.” The rules amend the Commission's existing Truth-in-Billing (TiB) rules, build on existing industry efforts to prevent cramming, and apply to wireline telephone carriers. The fact that the number of complaints received by the FCC, the Federal Trade Commission, and state agencies remains high and the widespread nature of cramming are strong evidence that current voluntary industry practices have been ineffective to prevent cramming and make clear the need for additional protection for consumers.

DATES:

Effective May 24, 2012, except 47 CFR 64.2401 (a)(3) and (f), which contain modified information collection requirements that have not been approved by the Office of Management and Budget (OMB). The Commission will publish a separate document in the Federal Register announcing the effective date of those sections.

ADDRESSES:

Federal Communications Commission, 445 12th Street SW., Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT:

Lynn Ratnavale, [e-mail] or [phone], or Melissa Conway, [e-mail] or [phone], of the Consumer and Governmental Affairs Bureau. For additional information concerning the Paperwork Reduction Act information collection requirements contained in document FCC 12-42, contact Cathy Williams, Federal Communications Commission, at [phone], or via email [e-mail].

SUPPLEMENTARY INFORMATION:

This is a synopsis of the Commission's Report and Order (R&O), FCC 12-42, adopted on April 27, 2012 and released on April 27, 2012, in CG Docket Nos. 11-116 and 09-158, and CC Docket No. 98-170. The R&O adopts some of the rules proposed in the Commission's Notice of Proposed Rulemaking (NPRM), FCC 11-106; published at 76 FR 52625, August 23, 2011. In the NPRM, the Commission sought comment on measures to address cramming. Specifically, the Commission proposed that wireline telephone companies disclose to consumers information about blocking of third-party charges and place third-party charges in a separate bill section from all telephone company charges. The Commission further proposed that wireline and wireless telephone companies, on their bills and on their Web sites, notify subscribers that they can file complaints with the Commission, provide Commission contact information for filing complaints, and provide a link to the Commission's complaint Web site on their Web sites. Simultaneously with the R&O, the Commission also issued a Further Notice of Proposed Rulemaking in CG Docket Nos. 11-116 and 09-158, and CC Docket No. 98-170. The full text of the R&O and copies of any subsequently filed documents in this matter will be available for public inspection and copying via ECFS, and during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. They may also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc., Portals II, 445 12th Street SW., Room CY-B402, Washington, DC 20554, telephone: [phone], fax: [phone], or Internet: www.bcpiweb.com. This document can also be downloaded in Word or Portable Document Format (PDF) at http://www.fcc.gov/​guides/​cramming-unauthorized-misleading-or-deceptive-charges-placed-your-telephone-bill. To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an email to [e-mail] or call the Consumer and Governmental Affairs Bureau at [phone] (voice), [phone] (TTY).

Final Paperwork Reduction Act of 1995 Analysis

The R&O contains modified information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, will invite the general public to comment on the information collection requirements contained in the R&O as required by the PRA of 1995, Public Law 104-13 in a separate notice that will be published in the Federal Register. In addition, the Commission notes that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506 (c)(4), the Commission previously sought specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees. In this present document, the Commission has assessed the potential effects of the various policy changes with regard to information collection burdens on small business concerns, and finds that these requirements will benefit many companies with fewer than 25 employees because they help address cramming without requiring a specific format for new disclosures or bill changes. In addition, the Commission has described the impacts that might affect small businesses, which includes most businesses with fewer than 25 employees, in the Final Regulatory Flexibility Analysis.

Synopsis

1. In the R&O, the Commission adopts rules requiring: (1) Wireline telephone carriers that currently offer blocking of third-party charges to clearly and conspicuously notify consumers of this option on their bills, Web sites, and at the point of sale; (2) wireline telephone carriers that place on their telephone bills charges from third parties to place non-carrier third-party charges in a distinct bill section separate from all carrier charges; and (3) wireline telephone carriers that place on their telephone bills charges from third parties to provide separate subtotals for carrier and non-carrier charges. These rules reflect an important step beyond the existing TiB rules by requiring additional clear and conspicuous disclosures and by requiring clearer and distinct separation of carrier and non-carrier charges.

Rules To Prevent Cramming From Happening

2. The Commission adopts a rule that wireline carriers clearly and conspicuously notify—at the point of sale, on each bill, and on their Web sites—consumers of blocking options they offer. There is significant record support for this requirement. State and public interest commenters generally support more consumer disclosure and education, but question whether disclosure requirements alone are the most effective means to combat cramming. Carriers urge the Commission not to adopt any sort of disclosure requirement. The Commission disagrees with the carriers that generally oppose clear and conspicuous disclosure of existing blocking options, but affords carriers the flexibility to implement the requirement in the manner that best accomplishes the goal of the rule within the context of each carrier's individual Web site, bill, and point-of-sale scripts. This flexibility should enable carriers to avoid unnecessary costs while providing effective disclosures.

Rules To Help Consumers Detect Cramming After It Happens

3. The Commission adopts a rule that wireline carriers that place on their telephone bills charges from third parties for non-telecommunications services must place those charges in a distinct section of the bill separate from carrier charges. Carriers also must clearly and conspicuously identify and disclose separate subtotals for charges from carriers and from non-carrier third parties on the payment page of bills. For consumers who do not receive a paper bill, subtotals must be clearly and conspicuously displayed in an equivalent location and in any bill total that is provided to the consumer before the consumer has the opportunity to access an electronic version of the bill, such as in a transmittal email message, on a payment portal, or on a Web page. The Commission believes that these requirements are critical to enabling consumers to detect the most common types of unauthorized charges on their telephone bills. Importantly, the rule does not prohibit carriers from using the same basic format for all third-party charges, provided the format otherwise complies with Commission rules. Although a carrier's compliance with the rule will be determined on a case-by-case basis, a carrier might seek to comply by, for example, designating “Part A” of its bill for carrier charges and “Part B” for non-carrier charges. Similarly, a carrier may prefer “Part A” for its own charges, “Part B” for third-party carrier charges, and “Part C” for non-carrier third-party charges. With clear and conspicuous labeling of each section of the bill, such formats likely would comply with the Commission's requirements. The Commission does not mandate any specific format and carriers have flexibility to develop their own solutions. This rule does not change carrier billing for bundled services. This rule is an incremental step forward from the status quo where many carriers already separate carrier and non-carrier charges on their bills, but may not place the non-carrier third-party charges in a distinct bill section or otherwise clearly and conspicuously differentiate between carrier and non-carrier charges.

Implementation

4. It likely will take carriers longer to make changes to their billing systems than to provide the required disclosures on Web sites and at points of sale. Given this and the time it will take to obtain OMB approval of these rules, the Commission concludes that it is reasonable to require carriers to implement required changes to their billing systems within 60 days after publication in the Federal Register of a notice that OMB approval has been obtained, and to require carriers to implement required disclosures on their Web sites and at their points of sale within 15 days after such notice.

Legal Issues

5. Communications Act: Section 201(b) of the Act provides authority for it to adopt the new rules. This section requires that carrier practices “for and in connection with” telecommunications services must be just and reasonable. The new rules are an incremental outgrowth of the TiB rules that have been in place for more than a decade. Billing for telecommunications services is an integral part of the provision of telecommunications services.

First Amendment: The new rules do not unconstitutionally burden carrier speech. Untruthful or misleading commercial speech does not enjoy First Amendment protections. Nor does misleading speech or speech concerning unlawful activity raise First Amendment concerns. A substantial percentage of non-carrier third-party charges are unauthorized, and many of the unauthorized charges are fabricated or otherwise fraudulent in violation of state and federal laws.

6. Thus, it appears that a significant percentage of the speech that the rules target is not protected by the First Amendment. Nevertheless, as the rules require speech in the form of mandatory disclosure and related format requirements, the First Amendment is implicated. The more lenient Zauderer (Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985)) standard rather than the intermediate Central Hudson (Central Hudson Gas and Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980)) standard applies to the rules adopted in the R&O. By giving consumers greater ability to identify and prevent fraudulent telephone charges, the rules are “reasonably related” to the government's interest of preventing cramming. Therefore, the rules easily satisfy the Zauderer standard. And, even under the three-part Central Hudson standard, the rules pass constitutional muster. Under the first part of the Central Hudson test, the Commission finds a substantial interest in assisting consumers in detecting and preventing placement of fraudulent, unauthorized charges on their telephone bills. With respect to the second prong, the rules advance the government's substantial interest.

7. Finally, the last prong is satisfied because the rules are proportionate to the substantial interest as an incremental, moderate approach to the prevention of cramming. The rules are narrowly crafted so that they are no more extensive than necessary to further the objective of enhancing the ability of consumers to detect and to prevent unauthorized charges on their telephone bills, and thus they satisfy the third prong of Central Hudson.

Final Regulatory Flexibility Analysis

8. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated into FCC 11-106 Notice of Proposed Rulemaking (NPRM). The Commission sought written public comments on the proposals contained in the NPRM, including comments on the IRFA. None of the comments filed in this proceeding were specifically identified as comments addressing the IRFA; however, comments that address the impact of the proposed rules and policies on small entities are discussed below. This Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

Need for, and Objectives of, the Proposed Rules

9. The record confirms that cramming is a significant and ongoing problem that has affected wireline consumers for over a decade, and drawn the notice of Congress, states, and other federal agencies. The substantial volume of wireline cramming complaints that the Commission, FTC, and states receive underscores the ineffectiveness of voluntary industry practices and highlights the need for additional safeguards. Although the Commission has addressed cramming as an unreasonable practice pursuant to section 201(b) of the Act, there had been no rules that specifically address this practice. In the R&O, the Commission adopts measures under the TiB rules to help consumers detect and prevent the placement of unauthorized charges on their telephone bills. The rules strike an appropriate balance between maximizing consumer protection and avoiding imposing undue burdens on carriers and billing aggregators. These rules avoid imposing the undue burden on consumers of eliminating third-party billing as a convenient means by which to receive charges. These rules avoid imposing undue burdens on small carriers that would raise their billing costs to an extent that would inhibit their businesses' ability to remain competitive and perhaps stifle innovation in the marketplace.

10. Blocking is a service many carriers and billing aggregators already make available to consumers; the new requirements will simply make the information about blocking more obvious to consumers when they sign up for telephone service. Requiring a separate section and separate totals for third-party non-carrier charges will also make it easier for a consumer to identify the services for which they are charged without requiring an entirely separate bill or the elimination of such charges from bills.

Summary of Significant Issues Raised by Public Comments in Response to the IRFA

11. There were no comments filed in direct response to the IRFA. Some commenters, however, raise issues and questions about the impact the proposed rules and policies would have on small entities.

12. Point of Sale Disclosure of Blocking Options. Although the state attorneys general, many state public utility commissions, and public interest commenters generally believe that the Commission should adopt additional measures to combat cramming, these groups support more disclosure to and the education of consumers as a general matter. Some carriers generally oppose clear and conspicuous disclosure of existing blocking options. They claim that required methods of disclosure would interfere with bill formatting flexibility, be unnecessary, or be costly. Nothing in the record convinces the Commission that it will be unduly burdensome or costly for carriers to implement this requirement—especially since carriers have the implementation flexibility they requested—given that that many or most carriers already offer blocking and notify consumers of blocking options when consumers dispute unauthorized charges. Thus, many carriers will be required only to expand their existing notification. Carriers are afforded the flexibility to implement this requirement in the manner that best accomplishes the goal of the rule within the context of each carrier's individual Web site, bill, and point-of-sale scripts. This flexibility should enable carriers to avoid unnecessary marketing and billing costs while still providing effective disclosures to their consumers.

13. Separate Section of Bill for Non-Carrier Third-Party Charges. The Commission adopts the requirement that where charges for service providers that are not carriers appear on a telephone bill, the charges must be placed in a distinct section of the bill separate from all carrier charges. There is significant support for greater separation of bill charges. While changes to bill format alone may not be enough to protect consumers, the requirement should make it easier for consumers to detect unauthorized charges on their bills that are described so as to appear to be for a telecommunications service, a common tactic used to hide unauthorized charges. The rules do not change anything with respect to billing for bundles.

14. Separate Totals for Carrier and Non-Carrier Charges. The Commission requires carriers to clearly and conspicuously disclose separate subtotals for charges from carriers and charges from non-carrier third parties on the payment page of their bills. For consumers who do not receive a paper bill, these subtotals must be clearly and conspicuously displayed in an equivalent location and in any bill total that is provided to the subscriber before the subscriber has the opportunity to access an electronic version of the bill, such as in a transmittal email message or on a Web page. One of the reasons consumers have difficulty detecting unauthorized charges is that these charges often are at or near the end of bills. By requiring separate subtotals on the payment page, which usually is the first page of a paper bill, the Commission addresses these concerns and guards against the unintended consequence that the requirement to place non-carrier third-party charges in a distinct section of the bill could be implemented in a way that exacerbates problems associated with such charges being near the end of a bill. Requiring separate subtotals on the payment page also helps to alert consumers that their bill contains non-carrier third-party charges and that these charges are detailed in a distinct section of the bill. This requirement also should help consumers to be aware that their telephone bills may contain non-carrier charges.

Description and Estimate of the Number of Small Entities to Which the Rules Will Apply

15. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the adopted rules. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. Under the Small Business Act, a “small business concern” is one that: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA).

16. Incumbent Local Exchange Carriers (“Incumbent LECs”). Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms had had employment of 1000 or more. According to Commission data, 1,307 carriers reported that they were incumbent local exchange service providers. Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees. Consequently, the Commission estimates that most providers of local exchange service are small entities that may be affected by the adopted rules and policies. Thus, under this category and the associated small business size standard, the majority of these incumbent local exchange service providers can be considered small.

17. Competitive Local Exchange Carriers (“Competitive LECs”), Competitive Access Providers (“CAPs”), Shared-Tenant Service Providers, and Other Local Service Providers. Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms had had employment of 1,000 employees or more. Thus under this category and the associated small business size standard, the majority of these Competitive LECs, CAPs, Shared-Tenant Service Providers, and Other Local Service Providers can be considered small entities. According to Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive local exchange services or competitive access provider services. Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer employees and 186 have more than 1,500 employees. In addition, 17 carriers have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or fewer employees. In addition, 72 carriers have reported that they are Other Local Service Providers. Of the 72, seventy have 1,500 or fewer employees and two have more than 1,500 employees. Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, Shared-Tenant Service Providers, and Other Local Service Providers are small entities that may be affected by the adopted rules.

18. Billing Aggregators. Neither the Commission nor the SBA has developed a small business size standard specifically for providers of billing aggregation services. The appropriate size standard under SBA rules is for the category Other Telecommunications Services and or Data Processing, Hosting and Related Services. Under those size standards, such a business is small if it has revenue of $25 million of less annually. Based upon the information provided by the commenting billing aggregators, the Commission estimates that the majority of billing aggregators are small entities that may be affected by adopted rules.

Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities

19. The rules adopted in the R&O require wireline carriers (1) To notify subscribers clearly and conspicuously, at the point of sale, on each bill, and on their Web sites, of the option to block third-party charges from their telephone bills, if the carrier offers that option; (2) to place charges from non-carrier third-parties in a bill section separate from carrier charges; and (3) to clearly and conspicuously disclose separate subtotals for charges from carriers and charges from non-carrier third-parties on the payment page of their bills. These rules may necessitate that some common carriers make changes to their existing billing formats and/or disclosure materials.

Steps Taken To Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered

20. The RFA requires an agency to describe any significant alternatives that it has considered in developing its approach, which may include the following four alternatives (among others): “(1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.”

21. Point of Sale Disclosure of Blocking Options. In the R&O, the Commission adopts a requirement that carriers notify consumers of their options to block non-carrier third-party charges from their telephone bills. Although this requirement imposes some costs on small carriers, the requirement is limited to disclosure of already existing blocking options. This limitation significantly reduces the compliance burden. The Commission concludes that the costs imposed upon carriers are outweighed by the fact that consumers would be significantly more protected from crammed charges appearing on their telephone bills.

22. Separate Section of Bill for Non-Carrier Third-Party Charges. In the R&O, the Commission amends its rules to require that when service providers that are not carriers appear on a telephone bill, the charges must be placed in a distinct section of the bill separate from all carrier charges. This rule places some burden on carriers, but the burden is mitigated because no specific format is mandated. Carriers have flexibility to develop their own solutions that comply with the rule as best works for their size and particular billing system, thereby reducing the burden. The rule will make it much easier for consumers to identify the charges on their bill that the record suggests are most likely to be crammed.

23. Separate Totals for Carrier and Non-Carrier Charges. The Commission requires carriers to clearly and conspicuously disclose separate subtotals for charges from carriers and charges from non-carrier third parties on the payment page of their bills. The separate totals requirement is part-and-parcel of the separate section for non-carrier third-party charges. The benefit to consumers in making their bills more clear and usable outweighs the burden on the carrier.

24. The Commission specifically identified two alternatives to the rules adopted in the R&O for the purpose of reducing the economic impact on small businesses. First, the Commission considered requiring all carriers to offer blocking. Second, the Commission considered requiring a specific bill format. However, the Commission rejected both of these alternatives because they are more costly to small businesses.

Congressional Review Act

25. The Commission will send a copy of the R&O in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

Ordering Clauses

26. Pursuant to the authority found in sections 1-2, 4, 201, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151-152, 154, 201, 303(r), and 403, the R&O is adopted.

27. Pursuant to the authority found in sections 4, 201, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 154, 201, 303(r), and 403, the Commission's rules are adopted.

28. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of the R&O, including the FRFA, to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 64

• Reporting and recordkeeping requirements
• Telecommunications
• Telephone

Federal Communications Commission.

Marlene H. Dortch,

Secretary.

For the reasons discussed in the preamble, the Federal Communications Commission amends part 64 as follows:

PART 64—MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

Subpart Y—Truth-in-Billing Requirements for Common Carriers

1. The authority citation for part 64 is amended to read as follows:

Authority: 47 U.S.C. 154, 254(k); 403(b)(2)(B), (c), Pub. L. 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 218, 222, 225, 226, 227, 228, 254(k), 616, and 620 unless otherwise noted.

2. Revise the heading for Subpart Y to read as follows:

Subpart Y—Truth-in-Billing Requirements for Common Carriers; Billing for Unauthorized Charges

3. Amend § 64.2400 by revising paragraph (b) to read as follows:

§ 64.2400

Purpose and scope.

* * * * *

(b) These rules shall apply to all telecommunications common carriers and to all bills containing charges for intrastate or interstate services, except as follows:

(1) Sections 64.2401(a)(2), 64.2401(a)(3), 64.2401(c), and 64.2401(f) shall not apply to providers of Commercial Mobile Radio Service as defined in § 20.9 of this chapter, or to other providers of mobile service as defined in § 20.7 of this chapter, unless the Commission determines otherwise in a further rulemaking.

(2) Sections 64.2401(a)(3) and 64.2401(f) shall not apply to bills containing charges only for intrastate services.

* * * * *

4. Amend § 64.2401 by redesignating paragraph (a)(3) as paragraph (a)(4), and add new paragraphs (a)(3) and (f) to read as follows:

§ 64.2401

Truth-in-Billing Requirements.

(a) * * *

(3) Carriers that place on their telephone bills charges from third parties for non-telecommunications services must place those charges in a distinct section of the bill separate from all carrier charges. Charges in each distinct section of the bill must be separately subtotaled. These separate subtotals for carrier and non-carrier charges also must be clearly and conspicuously displayed along with the bill total on the payment page of a paper bill or equivalent location on an electronic bill. For purposes of this subparagraph “equivalent location on an electronic bill” shall mean any location on an electronic bill where the bill total is displayed and any location where the bill total is displayed before the bill recipient accesses the complete electronic bill, such as in an electronic mail message notifying the bill recipient of the bill and an electronic link or notice on a Web site or electronic payment portal.

* * * * *

(f) Blocking of third-party charges. Carriers that offer subscribers the option to block third-party charges from appearing on telephone bills must clearly and conspicuously notify subscribers of this option at the point of sale, on each telephone bill, and on each carrier's Web site.