Commission Takes on Cramming, Considers Tough Rules for Carriers

Millions of U.S. consumers face cramming every year and carrier efforts have only made a dent in the problem, said FCC Consumer and Government Affairs Bureau Chief Joel Gurin. “Cramming is one of the largest categories of billing-related complaints that the commission receives,” Gurin said. “Both the states and the Federal Trade Commissions also see significant numbers of cramming complaints. And the complaints we see represent only a small part of the problem because crammers often hide their fraudulent charges in ways that make them hard to detect."

"The record in this proceeding shows that cramming remains a significant problem for wireline consumers, has it been for a decade,” said John Adams, who presented the NPRM for the bureau. “It is an emerging problem for wireless consumers."

Adams said the proposed rules would require wireline phone companies to notify consumers, at the point of sale, and on their websites, of any services they offer to block third-party charges from their phone bills. The rules would also require wireline carriers to list third-party charges separately and distinctly from other charges on the bill, he said. Carriers would also be required to notify consumers that they can file complaints and require that FCC contact information would be printed clearly on bills and listed on websites. The third requirement would apply to wireless carriers as well, Adams said.

Some of the proposed rules would go still further, examining whether wireline telcos should have additional obligations to block unwanted third-party charges, and even be required to use a particular format or font as part of a bill “to ensure that third-party charges are clearly and conspicuously disclosed,” Adams said.

The NPRM also asks if both wireless and wireline carriers should be required to provide contact information for third-party vendors on their phone bills and to verify the accuracy of this information, Adams said. The NPRM also examines a requirement that carriers screen third parties for prior legal violations before placing charges on bills, he said. In a final series of questions, the NPRM asks whether the rules that apply to wireline companies should also apply to wireless carriers and providers of interconnected VoIP service, he said.

Commissioner Robert McDowell expressed some reservations though he approved the release of the NPRM. McDowell said he was pleased that the NPRM seeks comments on the commission’s legal authority and whether the rules are compatible with First Amendment protections of free speech. “We must always remember that there are economic effects of new rules,” he said.

McDowell told us after the meeting he has never issued a full dissent to an NPRM, since it only asks a series of questions. “What I voted for was an opening of the record and an examination of the allegations,” McDowell said. McDowell said he would be concerned if “any further commission action would be overly prescriptive or burdensome” for industry. “I will wait to look at a complete record before making any decisions,” he said. “Some of the language in the NPRM does not give me comfort that this will be an eventual order embracing light-touch regulation."

Commissioner Michael Copps was enthusiastic about the proposed rules. “It’s always a good day at the commission when our agenda includes a consumer friendly item like today’s notice of proposed rulemaking on cramming,” he said. “It’s a good meeting whenever we can breathe new life into our mandate as a consumer protection agency.”

Commissioner Mignon Clyburn said she was particularly interested in parts of the NPRM that explore whether wireless and wireline consumers should receive the same protections. “I look forward to hearing from consumers and the industry about these issues,” she said. “This notice proposes rules that will give consumers better tools to detect and prevent unauthorized charges or mystery fees, which may appear on their telephone bills. Evidence to date indicates that this action is necessary, because the commission continues to receive between two and three thousand complaints a year from consumers about unwanted and unrequested charges from their telephone companies."

Cramming is both “fraudulent and illegal,” said Chairman Julius Genachowski. “It’s unfortunately a continuing and serious problem for wireline customers, and an emerging problem for wireless customers as well."

Free State Foundation President Randolph May said he generally doesn’t object to consumer-oriented rules. “But, obviously, regulations like the proposed cramming rules, impose costs on providers which, ultimately, are passed on to all consumers,” May said. “So this is a good example of a rule that should be subject to cost-benefit analysis before the commission moves forward. You also have to consider whether this is the type of problem that might better be left to FTC enforcement.”

"The third-party charge about which I am most concerned is the monthly government pilfer that is the ongoing, endless government charge for the Universal Service Fund,” said Seton Motley, president of Less Government. “Instead of the FCC making more demands of the private sector, they should be taking less out of consumers’ pockets."

But Parul Desai, policy counsel at Consumers Union, said the FCC was right to take a deeper dive on cramming. “There is clearly evidence that consumers are experiencing problems with unauthorized charges,” she said after the FCC vote. “We look forward to working with the commission to ensure more transparency for consumers and to protect consumers’ pocketbooks.”