Brief (1)
SB 431 includes two major provisions pertaining to telecommunications. The first provision pertains to the addition of certain services to a consumer's telephone bill without the consumer's express authorization. The second provision pertains to the imposition of penalties for late payments to the Kansas Universal Service Fund (KUSF).
Unauthorized Additions to a Consumer's Telephone Bill. SB 431 would amend the Kansas Consumer Protection Act to prohibit a supplier from adding certain services to a consumer's telephone bill, or from billing and collecting charges for such services, without first obtaining the consumer's permission. This practice is commonly referred to as "cramming." The bill defines as "supplemental telecommunications services" those services which would be subject to the prohibition. Services to which a per use charge applies would not be subject to the prohibition. Such services include, for example, directory assistance services and, if available, presubscribed dial-around services.
The bill would have the effect of requiring the supplier, if a complaint is lodged, to prove that the consumer had indeed expressly authorized the added service. Under existing law, the burden of proof resides with the consumer. The treatment of burden of proof for cramming which is proposed in this bill is the same as that accorded "slamming" complaints in existing law. ("Slamming" is the practice of switching a consumer's telephone company without the consumer's permission.)
The bill would exempt incumbent local telephone companies and long distance telephone companies from the burden of proof requirements. This mean that these companies would not be required to verify their consumers' requests for additional services. (Testimony indicated that these companies do not cause the problem and they would still be liable for deceptive acts and practices under the law.) However, all suppliers, including incumbent local telephone companies and long distance telephone companies, would be prohibited from engaging in deceptive, misleading, or confusing conduct when soliciting or verifying the addition of any supplemental telecommunications services to a consumer's bill. The same conduct would be prohibited pertaining to any solicitations or verifications of changes in a consumer's telephone company.
Finally, the bill would authorize organizations and businesses to bring their own private cause of action in allegations involving either slamming or cramming. In the Kansas Consumer Protection Act, the definition of "consumer" currently applies only to individuals or sole proprietors. Therefore, only individuals and sole proprietors are protected by the existing law prohibiting slamming.
Penalties for Late Payments to KUSF. The Kansas Corporation Commission would be expressly authorized to assess a late fee at a rate of not more than 1.5 percent per month on telecommunications carriers, including wireless companies, that have failed to make timely payments to the KUSF. (The Commission's authority to assess this fee should not be construed as new or additional authority.) Payments to the KUSF would have to be collected on a monthly basis. Furthermore, a penalty of not more than $1,000 per offense could be imposed on carriers that do not submit their KUSF calculation worksheets to the KUSF administrator. (The worksheet is used to compute the amount owed to the KUSF by each carrier.) If there is an action to revoke or suspend a carrier's certificate of convenience and necessity, the carrier could lose its certificate of convenience and necessity for failure to pay a KUSF assessment 60 or more days after receipt of notice of delinquency. (Every common carrier and public utility must obtain such a certificate from the Kansas Corporation Commission prior to transacting business in Kansas.)
Background
The introduced version of SB 431 resulted from cooperative efforts of staff of the Attorney General's office and several representatives from the telecommunications industry to strengthen consumer protection related to cramming practices. The Attorney General's office received 121 cramming complaints in 1998 and 59 cramming complaints in 1999. (The Attorney General's office began tracking those complaints in April 1998.) According to Steve Rarrick, Deputy Attorney General, Consumer Protection Division, Southwestern Bell reported approximately 5,950 cramming complaints in 1998 and 2,650 in 1999. Mr. Rarrick attributed the decrease in the number of cramming complaints to a provision in the slamming law enacted in 1998, which prohibits the use of sweepstakes and drop boxes for changing consumer's telephone companies or adding telephone services to their bills. Another reason he cited for the reduced number of cramming complaints is the increased effort of the telecommunications industry to protect consumers from cramming abuses. However, unauthorized Internet-related charges are the most common cramming complaints. Given greater use of the Internet, Mr. Rarrick expects such complaints to be lodged in the future.
Although the main focus of the introduced version of the bill is to prohibit cramming, certain provisions in the bill would modify or clarify the existing provisions in the law concerning slamming. For example, on January 6, 2000, the Kansas Corporation Commission issued an order which approved an agreement between Commission staff and others pertaining to Southwestern Bell's cost of service. This agreement addressed, among other issues, procedures for Southwestern Bell and Sprint to withdraw as designated carriers for intraLATA toll service. (Various issues related to designated carrier status were resolved in an earlier Commission order dated December 16, 1999, and were adopted by reference in the Commission's order of January 6, 2000.) The bill would ensure that a company which switches consumers to another telephone company under any terms identified by the Commission in future proceedings would not be committing a slamming violation.
In addition to Mr. Rarrick, spokespersons for the AARP and Sprint testified at the Senate Committee on Commerce in support of the bill. There were no opponents. A copy of written testimony from the Kansas Telecommunications Industry Association (KTIA) was distributed to Committee members. KTIA was involved in the crafting of this bill. The Senate Committee's amendment was technical.
The Senate Committee of the Whole amended the bill to apply the cramming prohibitions to affiliates or subsidiaries of local telephone companies and long distance telephone companies.
The House Committee on Judiciary deleted the Senate Committee of the Whole's amendment. (The Senate Committee of the Whole's version of the bill, which includes the language pertaining to affiliates or subsidiaries, is presently contained in 2000 SB 455, as amended by the House Committee on Utilities.)
The House Committee of the Whole amended the bill to include the section concerning penalties for late payments to the Kansas Universal Service Fund. This section was one of several sections included in 2000 SB 455, as amended by the House Committee on Utilities.
The Division of the Budget's fiscal note on the introduced version of the bill indicates that, according to the Attorney General, the bill would have no fiscal impact.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html