The Federal Communications Commission (“FCC”) has released a Notice of Proposed Rulemaking that suggests ways to strengthen its existing slamming and cramming rules.[1] Comments are due 30 days after the date the NPRM is published in the Federal Register. Reply comments are due 60 days after Federal Register publication.

What Is Slamming And How Does It Happen?

“Slamming” is an industry term for the illegal practice of switching a consumer's wireline telephone company for local, local toll, or long distance service without permission. Slamming distorts the telecommunications market by enabling companies that engage in fraudulent activity to increase their customer and revenue bases at the expense of consumers and law-abiding companies. Section 258 of the Communications Act expressly prohibits telecommunications carrier from engaging in slamming, as do Part 64 of the FCC’s rules. Slamming rules do not apply to mobile wireless (Commercial Mobile Radio Service “CMRS”), pre-paid wireless, or interconnected VoIP service, as these services generally provide one calling plan. The FCC’s slamming rules provide that a carrier may only submit a request to switch a consumer’s preferred service provider if the carrier has evidence the consumer has confirmed the switch. Evidence most often used by slammers is derived from a third-party verification (“TPV”), which are verbal confirmations obtained from conversations between an third-party verifier and the consumer.

How does slamming happen? Typically, an unscrupulous long-distance carrier, either on its own or through a telemarketing agents, will place a call to a consumer and then trick the individual into changing her preferred long-distance carrier. Sometimes, slammers will engage in misrepresentation by falsely stating that the carrier has a relationship with the consumer’s existing long-distance carrier. Slammers ultimately record consumers saying their name along with other information or words, such as yes or I agree, all of which are then used as TPV evidence to change the consumers’ long-distance carriers. Slammers often target vulnerable populations like the elderly, recent immigrants, small businesses, and non-English speakers.

What is Cramming?

The FCC has repeatedly found that cramming is an “unjust and unreasonable” practice in violation of Section 201(b) of the Act. Cramming occurs when a service provider places charges on a subscriber’s bill for products and services that the subscriber did not authorize. Generally, these unauthorized charges are small and labeled in a way to make them appear to be associated with a telecommunications service, making it difficult for consumers to detect and dispute them. Also, unauthorized charges are frequently related to products and services provided by a third-party. In many cases, third-party vendors give service providers a percentage of the crammed charges. Many service providers have moved away from this type of relationship because it raises truth-in-billing scrutiny, as evidenced by T-Mobile’s $90 million enforcement action in 2014 for charging its subscribers for third-party products and services that were not authorized.

The FCC’s truth-in-billing rules address cramming. They apply to traditional wireline service, and among other things, require that a telephone company's bill must provide a brief, clear, non-misleading, plain language description of the service or services rendered to accompany each charge, as well as identify the service provider associated with each charge. Only certain charge description requirements apply to CMRS providers. The FCC declined to extend the rules to VoIP service in 2012.

Notice of Proposed Rulemaking – Stronger Rules Are Needed

Despite the FCC’s rules and enforcement actions, slamming and cramming continue to be a problem for American consumers and service providers. In the two-year period from the beginning of 2015 through the end of 2016, the FCC received almost 8,000 slamming and cramming complaints. To strengthen its existing slamming and cramming rules, the FCC proposes to codify a wide-range of new requirements.

Slamming: Codifying An Express Ban On Misrepresentation

Recent FCC enforcement actions reveal that a major source of slamming is deceptive sales calls. The FCC’s existing verification rules do not expressly ban carrier- or carrier-agent-misrepresentations on the sales calls that typically precede a slam. In light of this, the FCC proposes to codify a new rule banning misrepresentations on sales calls and stating that any misrepresentation or deception would invalidate any subsequent verification of a carrier change, even where the submitting carrier purports to have evidence of consumer authorization (e.g., a TPV recording).

As mentioned earlier, the FCC’s slamming rules currently do not apply to mobile wireless, pre-paid wireless, or interconnected VoIP services. The FCC asks whether misrepresentations are enough of a problem for mobile wireless, pre-paid wireless and interconnected VoIP to justify extending the proposed misrepresentation rule to cover those services.

Slamming: Requiring Carriers To Record Entire TPV Sales Calls

Most often, slammers use TPV as evidence for changing a consumer’s preferred long-distance carrier. To obtain TPV evidence, a sales agent will call a consumer and have the consumer verify the carrier change during the conversation. Unfortunately, slammers often manipulate these sales calls to trick consumers into making a change, as explained by the FCC: 

For example, in the OneLink NAL, a Commission investigation found that sales agents for three carriers apparently told consumers they were calling about a package delivery in an effort to record the consumers’ voices, and apparently targeted non-English speakers. The carriers then apparently edited the recordings of consumer statements to produce fake TPVs. For example, one complainant received a call from someone claiming to be from the post office and had a package on hold but needed the complainant’s birth date. The complainant gave them a fake date that was later used in the fabricated TPV. Another complainant indicated that her elderly mother answered questions on the phone about a purportedly undelivered postal service package and that her responses were used in an agreement to switch carriers.[2]

To address this type of despicable behavior, the FCC seeks comment on requiring carriers that rely on TPVs to record the entirety of sales calls that precede a consumer’s preferred carrier switch. The FCC believes that a requirement to record all sales calls would deter misrepresentation and aid enforcement if misrepresentation does occur.

Additionally, the FCC requests comment on the general use of TPV as a means of providing evidence that a consumer wishes to switch carriers. The FCC asks whether eliminating TPVs as a verification mechanism would be effective in preventing slamming and provide substantial benefits to consumers. If TPV is retained, the FCC asks how TPV requirements should be modified.

Slamming: Automatic Preferred Carrier Freezes For Wireline Phone Services

To help prevent slamming, the FCC’s rules allow a subscriber to place a freeze on his or her preferred carrier selection (a “PIC freeze” is a prefferred or presubscribed interexchange carrier freeze). Subscribers must affirmatively opt-in to a PIC freeze. To release a PIC freeze, a subscriber must give the carrier from whom the freeze was requested his or her express consent. The FCC seeks comment on making freezes the default so that consumers are automatically afforded additional protection against slamming, rather than requiring them to take extra steps to do so.

Current rules require carriers to offer PIC freezes for local, intraLATA, and interLATA services, and get separate freeze authorizations for each service. However, most consumers purchase bundles of services rather than selecting individual services, which eliminates the need to distinguish between interLATA and intraLATA services. The FCC seeks comment on eliminating service distinctions and having carrier freezes apply to all wireline telephone services a consumer has with no need to seek separate authorization. Because consumers purchase CMRS and interconnected VoIP as all distance services, the FCC believes a default PIC freeze does not make sense for these services.

Cramming: Codifying An Express Ban On Unauthorized Charges

While cramming has been a long-standing problem and truth-in-billing rules help detect it, the FCC has never codified a rule against cramming. Thus, the FCC proposes to codify a rule prohibiting cramming. The FCC believes such a rule will act as a deterrent, provide greater clarity to carriers and will aid FCC enforcement actions. Noting that the cramming rules currently do not apply to interconnected VoIP, and only some of the rules apply to CMRS providers, the FCC asks whether it should extend the proposed rule to all CMRS, pre-paid wireless and interconnected VoIP providers.

Slamming Related Cramming: Default Blocking Of Third-Party Billing

The FCC’s rules currently do not prohibit carriers from placing third-party charges on consumers’ bills without verification by the consumer, a practice that has led to cramming.  Consumers who do not have a preferred long-distance provider have been crammed when a third-party carrier adds its long-distance service to the consumer’s bill without authorization.  Some consumers discover a slam and have their preferred carrier’s service reinstated but are still billed by the slamming carrier for local or long-distance service. Today, some carriers give subscribers the ability to block third-party charges, but only after affirmatively selecting this option. The FCC proposes to have third-party charges blocked by default.

The FCC seeks comment on requiring wireline carriers to block third-party charges for local and long-distance service – a frequent source of slamming-related cramming – by default, and only bill for such charges if a consumer opts in. According to the FCC, a vast majority of complaints and enforcement actions appear to target the billing practices of traditional local exchange carriers, not wireless carriers or interconnected VoIP providers. Nevertheless, the FCC asks whether the default blocking proposal should be extended to those services.

Slamming Related Cramming: Double-Checking A Switch With The Consumer

Instead of requiring carriers to block third-party charges by default, the FCC asks whether it should require carriers to confirm or “double-check” whether a subscriber wants to switch its preferred provider before making a change. The FCC believes that requiring carriers to double-check a change request could be a strong anti-slamming safeguard because it gives the consumer a second opportunity to confirm a switch. Current slamming rules do not allow the executing carrier to verify whether the subscriber wants to change carriers when it receives a preferred carrier change request, unless a consumer has activated a PIC freeze. The current rules reflect previous concerns that verification approach would be expensive, unnecessary, and duplicative.

Slammers Use Misrepresentation To Steal From Consumers

Slammers rely primarily on misrepresentation to trick consumers into changing their preferred long distance provider, which results in those consumers losing money because they have to pay a new fee. Even after they show they did not agree the carrier change or the fee, they nevertheless are not able to get their money back. Slamming is no different than stealing.  

Slammers use telemarketing agents to call unsuspecting consumers and lie about having an affiliation with the consumers’ then-current carrier. To be sure, many slammers are not this bold. Instead, other slammers provide extremely vague information, not enough information, or quickly ask questions that do not allow consumers to conclude that the slammer is not affiliated with their current carriers. But this is still slamming, and it happens all the time.

Absent Sufficient Rules, What Can Carriers Do To Combat Slammers?

What can carriers do when faced with a slammer? Good customer relations may not prevent all cases of slamming, but it helps a carrier react when a slammer is attacking the carrier’s customer base. Often, a subscriber will call his service provider after being solicited to change long distance providers by a third party that claims it is an affiliate. This enables a carrier to confirm to the subscriber that it is not affiliated with the slammer, but more importantly, it puts the carrier on notice that it is the target of a slammer. The carrier could then take action by helping the subscriber file a complaint at the FCC, sending a cease-and-desist letter to the slammer, and posting an alert on its website or correspondence with its subscribers.

One Point Of Contention Will Be The Proposal To Record Entire Sales Calls

Carriers and consumers that have been the victim of slammers would probably agree that current FCC rules are not strong enough. In particular, rules regarding the use of TPV needs to be strengthened. As has been shown in so many FCC enforcement actions, slammers are abusing the TPV process by using sales calls to trick consumers.

Victims of slammers will likely support the proposal to require carriers that rely on TPV to record the entirety of sales calls that precede a consumer’s preferred carrier switch. But, there will likely be some push-back on this proposal, with opponents claiming it will be overly burdensome and will provide little benefit. Look for this to be a point of contention. Additionally, carriers that have experienced slamming will likely support the measure for implementing some sort of double-check requirement, which would allow carriers to verify subscribers' preferred carrier changes.

For more on slamming, check out this article:

FCC Issues $1.44 Million Fine For Slamming

*****Footnotes*****

[1] Protecting Consumers from Unauthorized Carrier Changes and Related Unauthorized Charges, CG Docket No. 17-169, Notice of Proposed Rulemaking, FCC 17-91 (rel. July 14, 2017) (NPRM).

[2] NPRM at ¶6 (citing OneLink Communications, Inc., File No. EB-TCD-13-00007004, NAL/Acct. No.: 201632170001, FRN: 0007539471, et al, Notice of Apparent Liability Forfeiture, FCC 16-14 (Feb. 12, 2016)).

*Disclaimer* – This blog post is intended to inform the reader of a recent development related to communications law. It is not, and should not be considered as, specific legal advice.