NCL's Role in Fighting Telephone-Related Fraud and Abuse
NCL has taken an active role in educating consumers and advocating for appropriate consumer protections concerning telephone-related fraud and abuse. In 1992, NCL created the National Fraud Information Center, a unique hotline service, 1-800-876-7060, which consumers can call for advice about telephone solicitations and report possible fraud and deception. The NFIC's services were expanded in 1996 with the launch of its web site, www.fraud.org, through which consumers can make inquiries and report fraud. With the advent of scams in cyberspace, the NFIC now also offers advice about and takes reports of fraud perpetrated through online services and the Internet. Consumers can report telephone-related fraud to the NFIC by calling its toll-free hotline, using its online reporting form, by e-mail, or by writing.
Consumers' fraud reports are uploaded daily by the NFIC to the data base maintained by the Federal Trade Commission and the National Association of Attorneys General. The NFIC also relays selected fraud reports to over 160 individual federal, state and local law enforcement agencies, including the FCC.
NCL also coordinates the Alliance Against Fraud in Telemarketing, which is comprised of representatives from consumer groups, law enforcement and regulatory agencies, trade associations, telephone carriers, credit card companies, and other business interests. The AAFT conducts meetings and produces materials designed to educate its members and the public about telephone-related fraud, including unauthorized or misrepresented carrier switching. In addition, NCL works with the media, and in partnership with other groups, to raise public awareness about the benefits of telephone competition and deceptive practices of which to be wary.
Complaints about Carrier Switching Reported to the NFIC
Increasing Number of Complaints
NFIC has seen an alarming increase in carrier switching complaints. By the end of 1997 we had received 807 reports about carrier switching, making it the 5th most frequent subject of fraud reports made to the NFIC last year. In just the first five months of 1998, we have already received 825 slamming reports, elevating its ranking to the #2 fraud. Cramming, another telephone-service related fraud, is currently #1.
However, we know that what we are hearing is just the "tip of the iceberg." A Louis Harris & Associates survey commissioned by the League to look at the affects of telephone competition in three Midwest markets, Chicago, Detroit/Grand Rapids, and Milwaukee, revealed that nearly one-third of the respondents had been slammed themselves or knew someone who had. Only 7 percent complained to a government agency, 2 percent to a group such as ours. Most consumers complained to the slammer, the original carrier, or the local exchange carrier.
Nature of Carrier Switching Complaints
In analyzing the slamming reports we received in 1997, we found that only a small number of the carrier switching reports made to the NFIC, less than 10 percent, are from consumers who agreed to switch their service based on alleged false promises of lower rates or other incentives that were never delivered. Most of those incidents involved major, well-known carriers.
However, in the vast majority of the reports made to the NFIC, consumers complained that they never authorized their service to be switched. Most of the complaints concern long-distance service, but some consumers also reported unauthorized switching of local telephone service in areas where competition now exists. Complaints about unauthorized service switching were made against dozens of different companies, most of them resellers of telephone service. Many consumers noted that they'd never even heard of these companies until the names appeared on their phone bills. In fact, the Harris survey showed that 80 percent of the respondents with slamming experience discovered the problem when they received their bills.
Some consumers are mystified by how their service was switched, since they contend that they never had any conversation or other contact with the companies. In other cases, consumers said that they believed they were switched as a result of:
Consumers report being slammed multiple times -- one man was slammed by the same company seven times. Some also report being billed by the unauthorized carrier for other unwanted services, such as voice mail and paging. Most consumers were unaware that their service had been switched until they received their bills, and some did not realize it until several billing periods had transpired. Even after they thought that they had resolved the problem and gone back to their original carriers, they were slammed again.
Difficulty Reaching the "Slammer"
Consumers report having difficulty reaching the companies to which they have been switched. Either there is no answer at the company's number, or the consumer simply gets a recording, or the company hangs up on the caller. Often the company name and number on the bill is that of a billing agent who may be acting on behalf of several different carriers. Even the local telephone companies cannot tell consumers the names of the carriers or how to reach them, making resolving complaints and reporting slamming incidents to law enforcement difficult.
Problems with Proof of Authorization
When consumers question the authorization for switching, the proof that is offered is often fabricated. For instance, consumers report that:
Difficulty Resolving Billing Disputes
In addition to being charged exorbitant amounts, consumers have reported to the NFIC that they were charged for the same time period by more than one company, that they had difficulty getting adjustments for overcharges, and that they were threatened with collection or loss of telephone service for refusal to pay disputed charges. If they already paid the charges, they could not get refunds.
Consumers have also complained about inability to be reinstated in special calling plans or programs by their original carriers, and losing other premiums as a result of unauthorized service switching. In some cases, they also have difficulty getting switched back to their original carriers, and are required to pay switching fees, even though the FCC rules provide that they should be able to switch back at no charge. Furthermore, many consumers do not know that they have the right to pay only the amount that their original carriers would have charged.
In our Louis Harris survey, 80 percent of the respondents said that their slamming problems were resolved, but a third described the process as very difficult or somewhat difficult. Twenty-six percent said it was somewhat easy, while another third said it was very easy.
Victims of slamming are outraged and frustrated. People rely on their home and business telephone service and they feel strongly that their right to choose their carriers should be protected. They do not believe that they should have to spend their time and energy going around in what often seems like endless circles to resolve problems that are not of their making.
Suggestions for Fighting Slamming
Verification
Based on the consumer complaints that the NFIC has received, it is clear that there are problems with each of the present verification procedures. In light of this and in anticipation of even more competitive pressure as the market for telephone services expands, we believe that stronger measures are needed. In comments we have filed with the Federal Communications Commission we said that the "negative option" notice of carrier switching should be banned. Consumers fail to grasp the fact that this is not just another solicitation.
We also believe that contest entry forms should be banned as a means of promoting telephone services.
We also told the FCC that the same verification procedures should be required no matter whether the initial contact with the consumer was an in-bound or outbound call. We are aware of instances in which unauthorized carrier switching resulted from calls that consumers made, and we believe that protection is just as necessary in that case as with inbound calls.
Notice of Carrier Change
Notice separate from the bill should be sent to the consumers by the billing agent immediately after a carrier change has been processed. The slammer cannot be relied on to provide this notice.
Carrier Freezes
Carrier freezes give consumers the choice of having added protection in regard to their desired phone service. We believe that the option to freeze one's service, local and long-distance, should be freely promoted, as long as it is described fairly and accurately. Consumers' carrier freeze requests must be honored and strong penalties levied on companies that fail to do so. Legislation should clarify that if a carrier claims to follow one of the FCC's prescribed verification procedures, it does not negate the fact that a consumer requested PIC freeze protection and that the service cannot be changed until and unless that consumer has directly notified the local phone company of the desired change in service. The PIC freeze system must also be improved so that it works even when the slammer is a reseller of the original carrier.
Liability for Payment
None of this is enough, however. We believe that the most effective way to deter slamming is to prevent companies that change consumers' service without authorization from being able to reap the financial reward for doing so.
Payment Obligations
To remove the economic incentive to slam and help the innocent victims of this crime, Congress should provide that consumers have no obligation to pay any charges assessed by unauthorized carriers. Furthermore, they should be refunded any payments they have made to companies who slammed them. Consumers should not be obliged to have their bills recalculated to what their original carriers would have charged they should simply have no liability for unauthorized charges.
Dispute Resolution
Thirty days is adequate time for carriers and their billing service providers to resolve consumers' slamming complaints. The name, addresses and phone numbers of the carriers and the billing service providers, if any, should appear on the bills, along with instructions for questions and complaints. If satisfactory authorization cannot be shown and the consumer continues to dispute the charges, they should be removed from the bill and the carrier that assessed them can pursue the matter through collection or other lawful means. The FCC should have no more than 90 days to resolve slamming complaints.
State Action
States can generally act more quickly to stop illegal practices and obtain redress for their constituents. Congress should not preempt states from pursuing intrastate or interstate carrier switching abuses. We support provisions to allow states to help enforce federal antislamming rules while at the same time being able to use state procedures where appropriate.
Increased Penalties
We also support increased penalties for slamming. Private rights of action may be useful for class action suits, but state and federal agencies should also be able to seek restitution and punitive damages.
Conclusion
Finally, as our Harris survey shows, consumers are barraged by telephone, mail and advertising solicitations for telecommunications products and services. They need more objective information about their choices and education about their rights.
The problem of slamming has reached critical proportions. If adequate action is not taken to curb it, the marketplace for local and long distance telecommunications services will be a quagmire instead of the cornucopia that was envisioned as a result of increased competition. We look forward to working with the Congress and others to ensure that the telecommunications marketplace is fair and offers the benefits that consumers expect and deserve.
Founded in 1899, NCL is the nation's pioneer consumer group which works to bring consumer power to bear on marketplace and workplace issues. NCL worked for child labor provisions in the Fair Labor Standards Act (passed in 1938) and more recently, has helped organize the Child Labor Coalition (CLC) which is committed to ending child labor exploitation in the U.S. and abroad.