Consumer Protection Newsletter: 2nd Quarter
New Requirements for Wireless Service Contracts in Minnesota
Minnesota recently enacted new statutory provisions which in part will require wireless carriers to notify customers in writing 60 days in advance of any proposed “substantive change" in the contract. A “substantive change” includes any modification that would result in an increased charge or extend the term of the contract. If the subscriber does not affirmatively accept the change (orally or in writing), the original terms of the contract remain in force. The rules are to be codified at Minnesota Statutes, § 325F.695.
The provisions, initially scheduled to become effective July 1, 2004, would apply to all contracts entered into on or after May 1, 2004.
On June 18, 2004, the major wireless carriers filed suit in federal court in Minneapolis against the Minnesota Attorney General in an effort to prevent enforcement of the rules (Case No. 04-2981, D. Minn.). The carriers argue that the new provisions exceed the limited authority over wireless services reserved to states under the federal Communications Act.
The court granted the carriers’ request for a temporary restraining order (TRO) on June 29, 2004. The TRO prohibits any attempt to enforce the rules while the court considers the carriers’ request for a preliminary injunction.
California Adopts Final Consumer Protection Rules
On May 27, 2004, the California Public Utilities Commission (CPUC) adopted new rules governing the marketing and sale of telecommunications services (CPUC General Order 168, adopted in Decision 04-05-057). The rules impose extensive requirements on all types of telecommunications carriers (wireless, wireline, long distance providers) relating to, among other things, contracts, disclosures, customer notifications and billing.
Carriers must bring their operations into compliance by Dec. 7, 2004 for most of the rules and by July 31, 2005 for the remainder.
It is expected that carriers will seek reconsideration of the rules at the CPUC and pursue legal challenges in state and federal court. In conjunction with those efforts, carriers likely will seek to delay implementation of the rules.
FCC Considers Request for Declaratory Ruling Regarding Truth-In-Billing for “Regulatory,” “Administrative” and “Government-Mandated” Charges
The Federal Communications Commission has opened a docket to seek comment on a request by the National Association of State Utility Consumer Advocates (NASUCA) for a declaratory ruling that both wireline and wireless telecommunications carriers are prohibited from “imposing monthly line-item charges, surcharges or other fees on customers’ bills unless such charges have been expressly mandated by a regulatory agency.” According to the FCC, NASUCA sought the ruling because, it contends, current carrier uses of line-item charges are misleading and deceptive, bear no relationship to the regulatory costs they purport to recover, and thus constitute unreasonable and unjust practices and charges in violation of “full and non-misleading billed charges” principles the FCC adopted in its “Truth-in-Billing” proceeding. Comments must be filed by July 14, 2004, and replies by Aug. 13, 2004.
Telemarketers Take Do-Not-Call Challenge to U.S. Supreme Court While FTC Refines and Enforces Its Registry Rules
The American Teleservices Association (ATA) and two of its members have asked the Supreme Court to reverse the appeals court and declare the National Do-Not-Call Registry unconstitutional under the First Amendment. The ATA petition focuses on how the registry discriminates against commercial speech in the name of protecting consumers from unwanted calls, while permitting charitable, nonprofit, political and religious entities to continue calling even those consumers listed on the Do Not Call Registry. In seeking Supreme Court review, ATA’s petition points out that the registry regulates not just how companies use the phone to sell to consumers, but also effectively closes off an entire channel of communication that, if let stand, can serve as a model for regulation of similar channels including snail mail or email. It is expected that a decision on whether the Supreme Court will opt to hear the case will be made some time this fall and, if review is granted, that the case will heard this winter or spring with a decision by the time the Court recesses early next summer.
Meanwhile, the Federal Trade Commission has commenced its first enforcement action that includes alleged violations of the National Do-Not-Call Registry and commenced two rulemakings that propose to further tighten the regulatory burden faced by companies engaged in telemarketing.
- The FTC filed a complaint against National Consumer Council, a group of defendants the agency alleges “masqueraded” as a nonprofit debt-negotiation organization to deceive consumers into enrolling in their program by promising to reduce their debts, and that it called individuals who placed their telephone numbers on the Do-Not-Call Registry.
- In the first of the FTC’s two rulemakings, the FTC tripled the frequency with which companies must update their downloads of national registry data, requiring downloads now on a monthly instead of quarterly basis. (The Federal Communications Commission has sought comment on whether to amend its parallel Do-Not-Call Registry rules to match the new FTC requirement, though the Appropriations Act required only the FTC, not the FCC, modify its rules.)
- In the second rulemaking, the FTC proposed to increase the fees telemarketers must pay to acquire the do-not-call data necessary for them to lawfully place telemarketing calls. The FTC purports to increase the rate per area code from $25 to $45 and to raise the maximum cap from $7,375 to $12,375.
Bills Introduced to Create Company-Specific “Do-Not-Fax” Rule While Reinstating Established Business Exemption to Prohibition on Unsolicited Faxes
Congressman Joe Barton (R-Tex.) has introduced the Junk Fax Prevention Act of 2004. If passed, the bill would amend the Telephone Consumer Protection Act’s unsolicited fax provisions to include a company-specific do-not-fax requirement while at the same time answering the call of industry and trade associations to reinstate an exemption, removed by the Federal Communications Commission last year in its telemarketing rules revision, that allows companies to send unsolicited faxes to those with whom they have an “established business relationship.” The new law would reinstate the established business relationship exemption (except in cases where a do-not-fax request is lodged) so long as the fax bears a notice on the first page explaining the do-not-fax right and how to exercise it, and would allow the FCC, at its discretion, to permit trade associations that are tax-exempt non-profit organizations to send unsolicited advertisements to their members without including the do-not-fax notice. The bill would give the FCC 270 days to adopt regulations implementing it, and would require the FCC to report on, and GAO to study, the enforcement of the Act’s and the FCC’s junk fax provisions. Similar bills also were introduced in the Senate.
FTC Recommends Against a National Do-Not-Spam Registry and Announces Instead an Email Authentication Summit for Fall 2004
The Federal Trade Commission has reported to Congress that, at the present time, a National Do-Not-Email Registry modeled on the National Do-Not-Call Registry would fail to reduce the amount of spam consumers receive, could not be enforced effectively, and might in fact increase the number of unsolicited emails consumers face. The FTC submitted the report in response to a statutory mandate in the Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act. It suggested that, instead of adopting some kind of “do-not-spam” registry, that anti-spam efforts focus on creating robust email authentication systems that would prevent spammers from hiding their tracks and thereby evading Internet service provider anti-spam filters and law enforcement efforts. In furtherance of that alternative, the FTC announced that it will sponsor a Fall 2004 Authentication Summit to encourage thorough analyses and, ultimately, deployment of potential authentication systems.
FCC ENFORCEMENT CENTER
- On June 3, the FCC’s Enforcement Bureau released a consent decree with a telecom carrier relating to alleged “slamming” violations, entailing a $155,000 payment by the carrier. Earlier this quarter, on April 16, a forfeiture of $560,000 was assessed against another carrier for slamming violations.
During the second quarter of 2004 the Enforcement Bureau issued a substantial number of “citations” to telecom providers and others for alleged violations of the Telephone Consumer Protection Act (TCPA), threatening significant forfeitures for any future violations. Eleven (11) citations were issued for alleged unsolicited fax advertising; three (3) for prerecorded unsolicited messages to residential telephone lines; and two (2) for failure to honor the FCC’s national Do-Not-Call rules.
- On June 29-30 FCC Chairman Michael Powell participated in several events in Nashville and Knoxville, Tennessee, to promote several ongoing and upcoming FCC rural telecom initiatives. On June 30, he addressed the University of Tennessee Telehealth Network, emphasizing how rural access to advanced broadband services can spur economic development.
- On June 30, the FCC issued a Report and Order and Further Notice of Proposed Rulemaking (FNPRM) on Telecommunications Relay Services (TRS) for consumers with hearing and speech disabilities, addressing cost recovery and other issues, and inquiring whether additional video and IP-based relay services should become mandatory TRS services. Comments on the new proposals will be due 45 days after publication of the FNPRM in the Federal Register.
- On May 24, mandated wireless number portability (WNP) was extended to smaller markets and to an estimated 70 million additional subscribers.
- On June 18, the FCC increased the maximum monetary forfeiture penalties it may assess to reflect inflation. Henceforth, common carriers may be assessed up to $130,000 per violation per day, up to a maximum of $1.325 million.
On June 10, the FCC released its most recent (4Q03) quarterly report on consumer complaints and inquiries processed by the agency. Both wireless and wireline service complaints nearly doubled during the period, reflecting the implementation of wireless number portability and the national Do-Not-Call Registry during the quarter.