Voicelog Analysis Of FCC Anti-Slamming Rules

To read the actual text of the FCC rules, click here.     [Requires the free Adobe Reader]

Verification rules now require that all orders, whether from telemarketing, direct sales or otherwise, be verified through one of the three methods permitted by the FCC. This change requires verification for inbound telemarketing, Internet-based and all other orders. The revised rules specify that a carrier will need "clear and convincing evidence of a valid authorized carrier change" in the case of a slamming allegation.

There are now only three approved verification methods: Letters of Agency, Third Party Verification and Electronic Verification.

The rules provide for states to enforce the FCC rules and about 35 states have agreed to do so, so most of the enforcement action is going to come from the states. States are allowed to create additional verification requirements for intra-state service as long as they do not conflict with the FCC's rules, so carriers should understand the state requirements in states in which they sell. (Our experience has been that key states to watch out for are Florida, Louisiana, and Mississippi, although there are some other states with specific and slightly different rules.)

Resolving a Slamming Dispute

The FCC rules provide a "30 day" absolution rule, which means that a consumer who is slammed does not have to pay for the first 30 days of service from the carrier that slammed him. The process for administering this provision is a little complex.

First, the absolution only applies if the customer has noticed that the carrier change took place and refuses to pay. If the customer pays, they don't get their money back - instead they can potentially get 50% of what they paid, after their authorized carrier has been paid by the slammer. If the subscriber wants, they can insist on getting the difference between what they paid and what they would have paid with the authorized carrier, as opposed to the 50%.

Second, if the carrier accused of slamming wants to dispute the slamming charge and try to collect payment for the first 30 days, they must first notify the consumer to file with the state or federal enforcement agency. If the customer doesn't file (or provide proof of filing within 30 days) or if the enforcement agency decides it was an authorized charge, the alleged slammer can re-bill the customer for the 30 days' charges.

Note, too, that if the consumer has not paid a bill after the 30-day window, the alleged slammer can't try to collect that either. The rules say that all unpaid charges must be removed upon a slamming allegation. Presumably, the alleged slammer is to remove the charge, then re-bill it once the regulators agree that the carrier change was valid. And, if the slamming claim is undisputed or resolved in the consumer’s favor, the original carrier can try to collect up to 50% of what the alleged slammer billed after the 30-day window.

Now, if the customer does pay their bill, the process changes. The government agency investigates the charge, and decides if the carrier change was a slam. If the agency decides it was a slam, it directs the slammer - in addition to any state remedies - to remit to the old carrier 150% of the amount collected from the consumer. The old carrier is then to send one-third of the collected money to the consumer. If the old carrier doesn't collect, it doesn't have to pay the customer -- just inform the state government agency and the consumer of the non-collection and also inform the consumer of their right to pursue a claim against the slammer on their own.

Whether the customer pays or not, a carrier who is found to have slammed someone is responsible for paying the cost of switching the customer back to their old carrier. In addition, a slammer is supposed to pay for the old carrier's cost of collecting the money paid by the customer.

Carrier Freeze Rules

PC freezes are where the customer instructs the local exchange carrier not to execute a carrier change without direct instructions from the customer. PC freezes can be implemented for any type of service -- interLATA, intraLATA, local, etc. - for which there is competition.

The rules are designed to keep incumbent LECs from abusing the freeze process as a way to inhibit competition. LECs are required to offer freezes on a non-discriminatory basis, regardless of the carrier the customer selects, and to include clear and neutral explanations of freezes in their literature. Carriers must also verify a freeze -- using one of the three approved methods: LOA, TPV or electronic verification. Finally, carriers have to provide at least two ways to lift a freeze: an LOA – either traditionally or electronically signed - and a three-way call which the submitting carrier (the carrier trying to get the order placed) can access.

Internet LOAs

The FCC has approved the use of electronic LOAs and electronic signatures. Electronic LOAs must follow the same basic requirements as paper LOAs but can be delivered using the Internet and electronic mail. Electronic signatures must follow the requirements of new federal legislation permitting the use of electronic signatures*.

Below is an excerpt from the FCC's discussion in its Third Report and Order:

Carriers using Internet LOAs to sign up subscribers will be required to comply with the consumer disclosure requirements of section 101(c) of the E-Sign Act. Section 101(c) requires, among other things, that the carrier obtain the subscriber's consent to use electronic records, obtain the subscriber's acknowledgment that he or she has the software and hardware necessary to access the information in the electronic form (i.e., Internet LOA) used by the carrier, and give the subscriber notice of the procedures for withdrawing consent. Section 101(c) also requires carriers to inform subscribers of any right (after consent to the transaction) to a non-electronic (that is, paper) copy of the electronic record of the transaction, to tell them how to obtain such a copy, and to make clear whether a fee will be charged for the copy. Accordingly, we modify our rules to incorporate by reference the requirements of Section 101(c) of the E-Sign Act. We note that these consumer disclosures, in conjunction with the form and content requirements for LOAs under 64.1130 of our rules, are likely to address concerns about unwary consumers who might inadvertently switch their telephone service providers while exploring websites or participating in contests on the Internet. At the same time, we recognize that many commenters expressed concerns regarding fraudulent use of Internet LOAs that may not be fully addressed by the protections afforded by compliance with section 101(c) of the E-Sign Act. In this regard, we note that, if a subscriber contests the authenticity of an Internet LOA, the carrier will have the burden of proof to counter the subscriber's allegation.

Please note that, consistent with the FCC's existing paper LOA requirement that the LOA be separate from any inducements for service, electronic LOAs must appear as a separate screen. It is also useful to note that the FCC permitted the use of electronic authorization for carrier freezes and the lifting of those freezes.

Third party verification requirements

Here are the requirements for TPV as set by the FCC:

• The authorization by the customer is oral.
• The authorization includes appropriate “verification data” (e.g. social security number or date of birth). Other required script elements are: the name of the subscriber, the person on the call is authorized to make a carrier change, confirmation that the person wants to make the carrier change, identity of the carriers affected (although we believe the FCC has dropped the requirement of asking for the previous carrier), the telephone numbers affected, and the types of services involved.>
• Each service to be changed (e.g. interLATA, intraLATA) is separately verified. This can be done on the same call, but each authorization must be separate. What that means is unclear but there are many cases of the FCC finding a slam based on lack of separate authorization, so we suggest you consult your attorney on this rule.
• The TPV is done in the same language as the original sale.
• The TPV is recorded in its entirety and the recording is maintained for at least two years.
• The TPV provider is appropriately qualified. This has never been defined but deep in the record on TPV is a reference to the ability of the TPV provider to handle the call volume required.
• The TPV provider is not managed, controlled or directed by the carrier or carrier’s marketing agent, and has no financial incentive to confirm orders.
• The TPV provider operates in a physical location separate from the carrier or the carrier’s marketing agent.
• TPV can be either live agent or automated system as long as both operate under the same rules. Automated systems must allow the customer to transfer to a live agent at any time.
• The sales representative must drop off the line once the verification has begun unless the carrier certifies that they are unable to meet this “drop off” rule.

Definition of subscriber

A recurring issue among carriers is the question of who is permitted to provide authorization for carrier change. The FCC's standard is that it is either the person responsible for payment or an adult authorized by that person. Of course, as a practical matter, most carriers are unable to verify the actual authority of the person they're speaking with in a telemarketing call. So while the legal standard may be clear, this area will continue to present problems for carriers. Below is the actual text from the FCC order:

"The [subscriber is the] party identified in the account records of a common carrier as responsible for payment of the telephone bill, any adult person authorized by such party to change telecommunications services or to charge services to the account, and any person contractually or otherwise lawfully authorized to represent such party."

Carrier reporting

Carriers are required to report on a periodic basis the number of slamming complaints that they receive. We believe this reporting requirement has been dropped.

Registration requirement

Although the FCC currently requires reports to be filed by carriers, this order requires that all carriers register with the FCC. The FCC has modified an existing report form (Form 499 - A) to capture the registration information that the FCC wishes. In addition, carriers who sell to resellers will now have an affirmative duty to ascertain whether that reseller has filed a registration with the FCC. The underlying carrier is not responsible for the accuracy of the reseller's registration information.

The Rules -- Briefly:

This guide is a thumbnail sketch of the rules. It's designed to hit the highlights only and is not remotely comprehensive. If you only have a few seconds to study the rules, however, we hope you will find it useful.

• All orders must be verified -- inbound, LEC, PC freezes.
• Three verification methods are approved -- LOAs, TPV, electronic verification.
• TPV must be truly independent -- no ownership, management, control by carriers.
• Customers who successfully dispute PC changes do not have to pay 1st 30 days' charges.
• After 1st 30 days customers should pay old carrier for slammer's charges, at a rate of 50% of the slammer's charge or the old carrier's charges.
• Carriers can recover 150% of lost revenue collected by slammers.
• States are the primary investigation and enforcement arm (about 35 states so far).
• Carriers must attempt to collect and refund 50% of money paid to slammers for customers.
• Old carriers must reinstate premiums lost through slamming.
• Freezing carriers have to provide for LOAs and 3-way calls to lift PC freezes.
• Existing carriers can’t reconfirm the order submitted by a new carrier.

Compliance checklist
Here's a quick checklist to see if you comply with the new verification rules.
For LOAs, does it or is it:

• a separate or easily separable document
• have the sole purpose of authorizing the order
• signed and dated by the subscriber
• not combined with inducements of any kind (other than a check)
• have a type face big enough and readable enough to be clearly legible
• include name, address and telephone number(s) covered by the LOA include the order to switch to the submitting carrier
• esignate the submitting carrier as the customer's agent to submit the order
• explain that the subscriber understands that only one carrier can be chosen for each service type (interLATA, intraLATA, local, etc.) and provide a separate statement for each type of service being changed.
• explain that there may be a charge to the subscriber for changing carriers
• use as the submitting carrier the carrier who directly sets rates for the customer
• void of language suggesting or requiring that a subscriber take an action to retain the incumbent carrier
• if translated, is it translated throughout, and does the language match the language of the marketing materials used
• if it is a check, is it/does it
• avoid of promotional language on the check
• have bold face notice that the check is an LOA
• have LOA language near the signature line on the back of the check
• provide clear and convincing evidence (i.e., a clear signature matching the customer's)

For Third Party Verification, does it or is it:

• an oral authorization
• include clear and conspicuous confirmation of the order confirmation by the subscriber including:
  • the name of the subscriber
  • confirmation that the person on the phone is authorized to change carriers
  • confirmation that the person wants to change carriers
  • the numbers affected
  • the services affected with separate authorizations for each
• include "appropriate verification data" - e.g.: SSN, DOB
• conducted by a fully independent third party. This means the third party must:
  • not be owned, managed, controlled or directed by the submitting carrier or their agent
  • have no financial incentive to confirm orders
  • operate in a location physically separate from the submitting carrier or carrier's agent
• provide clean and convincing evidence (e.g. a recording of the customer giving their authorization.)

For Electronic Verification, does it or is it:

• the "subscriber's electronic authorization"
• accessed using a toll free number
• placed from the telephone number being changed
• connect the subscriber to a VRU or similar that records required information
• automatically record the ANI
• confirm the subscriber's information
• provide clear and convincing evidence (e.g. an electronic record with an affidavit testifying to the validity and integrity of the verification method). Note: we do not know what the reaction to electronic verification will be and we caution you about its use.