The Federal Communications Commission announced a $29,600,000 proposed fine against four related IXCs that the FCC says apparently perpetrated “an array of fraudulent, deceptive and manipulative practices that targeted consumers with Hispanic surnames.” The FCC is accusing the companies of violating multiple statutory provisions and FCC rules involving slamming, cramming, misrepresentation, and deceptive marketing.
- misrepresenting themselves to consumers by “spoofing” their telephone number;
- tricking consumers into making statements or disclosing information that the companies recorded and then used to fabricate audio recordings that they provided to the FCC as evidence that the consumer authorized a carrier change;
- charging for services that the consumer had not ordered; and
- submitting false and/or misleading information to the FCC.
The fine is for a total of 142 slamming and cramming complaints and 66 instances of misrepresentation.
What services were the companies selling?
The companies provide domestic and international long distance telecommunications services and were billing consumers on their local telephone bills using the services of a billing aggregator.
What did the companies do wrong?
Commissioner Pai said it best, stating that the companies “allegedly used telemarketers to pretend to be package delivery companies in order to trick consumers into reciting certain words like “Yes” or “051580.” OneLink even went so far as to spoof telephone numbers so that a consumer looking at caller ID would think the Post Office was calling. OneLink then spliced the recordings it made of these calls together with a standard third-party verification tape to justify changing their telephone carrier. And it specifically targeted Americans with Latino surnames, sometimes including Spanish recordings even when the target didn’t speak Spanish.”
How specifically did they pull this off?
Here’s a typical example of what happened. A consumer would receive a call about a (nonexistent) package waiting for them at the post office or other location. The call would have a spoofed caller ID so that the consumer believed the caller was actually from a specific U.S. Post Office branch office. The caller would ask the customer to verify his or her name and then give them a code for the package, such as 51580, which they would ask the customer to repeat. The conversation was recorded, and the consumer’s answers such as “yes” or “si,” would then be used to create a fake third party verification (TPV) recording. The code number would be used as the customer’s date of birth.
The complaining consumers told the FCC said that they never actually agreed to a carrier change and that the TPV recordings were falsified. Other consumer comments included:
- the voice on the tape was not the voice of the family member that was alleged to have approved the carrier change, or was not a voice they recognized at all;
- no one with that name lived at their home;
- or the birth date or mother’s maiden name given on the tape was not correct.
Many customers said that they make it a point not to speak Spanish on the phone or that they don’t speak Spanish at all and thus could not have given permission in Spanish as the TPV recoding suggested. Others noted that the numbers slammed were not even used for telephone service but were exclusively for alarm systems or were 10-digit numbers assigned to Internet access accounts.
What rules or statutes did the companies violate?
The FCC found that the companies apparently violated:
- §201(b) of the Communications Act for: (1) the misrepresentations made in connection with marketing calls to consumers; (2) submitting falsified TPV recordings as evidence of consumers’ authorization to switch their carriers and charge them for service; and (3) placing unauthorized charges on consumers’ telephone bills.
- §1.17 of FCC’s rules for providing false and misleading material information to the FCC in the form of falsified audio “verification” recordings and accompanying letters; and
- §258 of the Communications Act and §64.1120 of the FCC’s rules for submitting requests to switch consumers’ preferred long distance carriers without authorization verified in compliance those rules.
How did the FCC calculate the fine for slamming and cramming?
The FCC’s base forfeiture for slamming rule violations is $40,000; it uses the same dollar amount for cramming violations. The FCC can assess separate forfeitures for a slam and for any unauthorized charges that result from the unlawful carrier switch. In this case, the FCC decided that assessing a forfeiture for each slamming violation that occurred within the last 12 months was sufficient to protect consumers and deter future violations of the Act and did not necessitate the assessment of an additional forfeiture for the subsequent cram. However, when the slam occurred more than a year prior to the date of the NAL or where the companies did not complete a carrier switch, the FCC assessed a forfeiture only for the cram (i.e., the unauthorized charges placed on the consumers’ telephone bills that occurred within the last 12 months).
The FCC’s rules allow it to adjust the base forfeiture amounts based on the egregious and repeated nature of the violation. Given the egregiousness of the companies’ conduct and the substantial harm they caused consumers, the FCC decided that a significant upward adjustment to the base forfeiture was appropriate. Thus, it proposed an upward adjustment of $80,000 per violation plus an additional $2,000,000 (i.e., $500,000 for each Company).
This brings the total portion of the forfeiture for slamming and cramming to $19,040,000 ($120,000 for each of the 142 violations plus the $2,000,000 flat rate adjustment).
How did the FCC calculate the fine for misrepresentation or lack of candor?
The FCC’s base forfeiture for misrepresentation or lack of candor is $160,000 for a single violation up to $1,575,000 for a continuing violation (this is the statutory maximum). Under the circumstances here, the FCC applied the base forfeiture amount ($160,000) to each of the 62 fabricated recording submitted to the FCC. This resulted in a proposed forfeiture of $9,920,000. In addition, because the companies provided numerous apparently fabricated TPVs with their responses to four FCC subpoenas, each subpoena response was considered to be an additional violation. Adding those four additional violations results in a total forfeiture of $10,560,000 for 66 violations of §1.17 of the FCC’s rules.
What happens now?
The companies have 30 days to either pay the forfeiture or file a written statement seeking reduction or cancellation of the proposed forfeiture.
Is their federal operating authority safe?
Not necessarily. The FCC said that in light of the companies’ egregious misconduct and the demonstrated harm to consumers from the apparent violations, it would consider initiating proceedings to revoke their FCC authorizations after they have an opportunity to respond to the Notice of Apparent Liability for Forfeiture.
In this statement, Commissioner Pai said he was grateful to his colleagues for agreeing with his “two key requests in this matter. First: to prosecute OneLink for the full $29.6 million forfeiture it deserves under our precedent. Second: to consider revoking OneLink’s authorizations to offer telephone service in the United States once it has an opportunity to respond to this Notice of Apparent Liability. For conduct this egregious, the book should be thrown.”