Telecommunications:

State and Federal Actions to Curb Slamming and Cramming

RCED-99-193: Published: Jul 27, 1999. Publicly Released: Aug 26, 1999.

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Pursuant to a congressional request, GAO reviewed federal and state efforts to prevent telephone slamming, which involves switching a consumer's telephone service from one telephone company to another, and cramming, which involves placing unauthorized charges on a consumer's telephone bill for services and products, focusing on the: (1) number of complaints about slamming and cramming received by state and federal authorities; (2) types of protections implemented by state and federal authorities to increase consumers' ability to protect themselves against slamming and cramming; and (3) state and federal enforcement actions taken against slamming and cramming violations since 1996, including the names of the companies or individuals most frequently subject to such actions.

GAO noted that: (1) slamming continues to be a significant problem for consumers; (2) from 1996 through 1998, state public utilities commissions saw the number of complaints about this abuse rise from 20,741 to 39,688, and federal authorities saw the number of complaints rise from 12,795 to 20,154; (3) in addition, cramming has emerged as a new problem; (4) complaints to state authorities rose sharply from about 800 in 1996 to nearly 20,000 in 1998; (5) in 1998, complaints about cramming became the fourth most common type of written complaint received by the Federal Communications Commission (FCC) and the second most common type of complaint received by the Federal Trade Commission (FTC); (6) to help protect consumers against slamming and cramming, most state public utilities commissions: (a) require telephone companies to obtain oral or written authorization from consumers before making changes to their service; (b) have procedures for resolving consumers' complaints; and (c) provide consumers with information on ways to prevent telephone slamming and cramming; (7) at the federal level, FCC adopted new rules against slamming in December 1998 that strengthen procedures for verifying changes in service and absolve consumers of liability, within certain limits, for charges by unauthorized companies; (8) to protect consumers against cramming, FCC adopted new rules in April 1999 requiring telephone companies to format their bills so that consumers can more easily identify any unauthorized charges; (9) in October 1998, FTC proposed rules addressing cramming that would require a consumer's express authorization before charges other than for local or long-distance calling could be placed on the consumer's telephone bill and would allow the consumer to dispute any unauthorized charges; (10) these proposed FTC rules could be final before the end of 1999; (11) state commissions were able to resolve through informal action nearly 60 percent of the slamming complaints they received in calendar year 1998; (12) since April 1998, FTC has taken seven enforcement actions against cramming that have resulted in injunctions and restraining orders; and (13) two of these companies have agreed to final stipulated court orders providing consumers with $53 million in credits and restitution and have agreed to modify their business practices.

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