Prohibits 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 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.