Fcc Issues Multi Million Dollar Forfeiture

Just before the holidays, the FCC issued a number of Notices of Apparent Liability For Forfeiture to wireline and wireless carriers. The most interesting was the $3.56 million fine against Consumer Telecom, Inc. for engaging in deceptive marketing practices, slamming, cramming, and violating the FCC’s truth-in-billing rules by failing to clearly and plainly describe charges on telephone bills.

What Did Consumer Telecom Do Wrong?

The deceptive marketing practices involved “tricking” consumers into believing that the telemarketers were calling on behalf of the consumer’s existing phone company and were simply asking the consumer to authorize a change to their existing service with that provider — not to switch their provider. This deceptive marketing, in turn, led to third party verifications that failed to satisfy the FCC’s requirements. This is because the verifier confirmed the change in long distance service, not a change in provider. As the FCC put it: “The consumers heard the verifiers confirming a change in “service” after CTI’s telemarketers had just told them that the telemarketers were calling on behalf of consumers’ existing carrier, and merely attempting to change the existing service-but not the carrier. The statement reinforces the overall impression that the call does not relate to a carrier change. And because the consumers had not yet agreed to change their carrier, there was no change to “confirm.”” Thus, all the carrier changes were also unauthorized.


Looking at Consumer Telecom’s billing practices, the FCC found it had crammed certain customers who, due to their PIC freezes, had been successful in preventing Consumer Telecom from successfully completing the carrier change. In this instance, Consumer Telecom billed consumers on the pretext that, regardless of whether a carrier change took place, the consumer had authorized its “service” which, in addition to 1+ service, included a travel card, directory assistance, and casual calling long distance. The FCC rejected this claim. It found not only that the third party verifications failed to demonstrate that consumers agreed to a bundle of services, but also that Consumer Telecom’s bills did not in fact reflect a charge for a bundled service.


Regarding the truth-in-billing rules, the FCC found that Consumer Telecom’s direct bills were “neither sufficiently clear nor specific enough to aid customers in assessing their bills.” Specifically, the bills: (1) were not dated and did not include a payment due date; (2) included a single line item charge identified as “long distance service” but did not specify what is included in that amount, what period of time the charge covers, or any monthly fees or taxes that typically appear on a bill issued by a LEC. The FCC noted that the bills also failed to identify any services that Consumer Telecom claimed were part of its bundled package.


How Did The FCC Arrive At The $3.56 Million Figure?

The forfeiture amount broke down as follows:


  • $40,000 for each of seven slamming violations and $40,000 for each of 18 cramming violations, with the amounts for six crams and slams involving misrepresentation tripled to $120,000 each because the violations were deemed egregious.
  • $40,000 for each of two bills sent within that past 12 months that the FCC reviewed and deemed deceptive;
  • An upward adjustment of $1.5 million due to the repeated and egregious nature of the violations, and considering the FCC’s previous warnings to carriers that it would not tolerate deceptive marketing practices; and
  • An upward adjustment of $500,000 because Consumer Telecom caused substantial harm to the public because one-third of the complaints reviewed in the course of the investigation were from senior citizens or relatives of elderly or infirm consumers.


Preferred Carrier Change Requirements


Customer Relations Rules