FTC Supports FCC Proposals To Halt Fraudulent Pay-Per-Call Services from Evading Regulations

The Federal Trade Commission today offered support for its sister agency’s efforts to keep unscrupulous pay-per-call service providers from evading federal regulations governing the pay-per-call services -- commonly known as the “900-number” -- industry. In particular, the FTC said it supports the Federal Communications Commission’s efforts to prevent pay-per-call transactions from being disguised as long-distance calls, by requiring that whenever a provider of information or entertainment programs gets any renumeration for calls to such a program, the calls must fall within the 900-number dialing code. The Commission also said it supports efforts to narrow an exemption from regulatory requirements in situations where there is a “presubscription” agreement between the caller and the information provider, by requiring that such agreements be in writing.

The FTC and the FCC have jurisdiction over different aspects of the pay-per-call industry and, pursuant to federal statutes enacted in 1991 and 1992, have promulgated rules that, together, govern the marketing of 900-number information and entertainment services, cost disclosures, how calls are billed, and the handling of consumers’ billing disputes. The Telecommunications Act of 1996 tightened the earlier statutes, and directed the FCC to revise its rules to implement the new restrictions. Under the Act, the FCC also is proposing to take additional action necessary to prevent further efforts by fraudulent companies to get around its rules and, in July, had sought comments on its proposals.

Disguised Pay-Per-Call Services

Some information providers have attempted to evade existing regulation by restructuring their pay-per-call transaction to incorporate the cost of the information or entertainment programs into the long-distance charges for the call, the FTC said. In such instances, consumers who believe they are paying only “normal” long-distance charges may face unexpectedly large bills. The FCC proposal attempts to prohibit this by funneling all interstate pay-per-call traffic through the 900 service access code. The FTC said consumers likely would benefit from this proposal because it would allow them to recognize telephone numbers for calls that entail charges above regular long-distance charges, would subject the calls to cost-disclosure and billing-dispute requirements, and would enable parents and others to prevent charges for unauthorized call on their phones by blocking access to 900 numbers. The FTC comment also discusses some of the difficulties that might arise when applying this proposal to international calls.

Presubscription Agreements

The FTC’s 900 Number Rule, which requires pay-per-call services to disclose the costs of calls and to follow prescribed billing-dispute procedures, does not apply when there is a “presubscription” agreement between the pay-per-call service and the caller. Under a valid presubscription agreement, the service discloses cost and other key information and requires the callers to use identification numbers or some other effective means to prevent consumers from being charged for calls they did not authorize from their phone to these services. Consumers can enter into a presubscription agreement verbally by calling an 800 number, under current law. But unscrupulous information providers have used 800 numbers to create sham presubscription agreements, the FTC said. These companies, instead of providing subscribers with an effective means of preventing charges for unauthorized calls, often use Automatic Number Identification to bill charges for calls to the telephone lines from which the calls were placed. The Telecommunications Act of 1996 requires presubscription agreements for toll-free calls to be in writing, and the FCC has proposed to extend that written requirement to toll calls. The FTC said it supports that and related proposals.

The Commission vote to file the comments with the FCC was 5-0.

Copies of the comments, as well as the FTC’s 900 Number Rule and brochures for consumers and businesses explaining its provisions, are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov

(FTC File No. V960013)