[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
      H.R. 3993, THE CALLING CARD CONSUMER PROTECTION ACT OF 2009 

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON COMMERCE, TRADE,
                        AND CONSUMER PROTECTION

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 3, 2009

                               __________

                           Serial No. 111-86


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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman

JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin 
Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont

                                  (ii)
        Subcommittee on Commerce, Trade, and Consumer Protection

                        BOBBY L. RUSH, Illinois
                                  Chairman
JANICE D. SCHAKOWSKY, Illinois       CLIFF STEARNS, Florida
    Vice Chair                            Ranking Member
JOHN P. SARBANES, Maryland           RALPH M. HALL, Texas
BETTY SUTTON, Ohio                   ED WHITFIELD, Kentucky
FRANK PALLONE, Jr., New Jersey       GEORGE RADANOVICH, California
BART GORDON, Tennessee               JOSEPH R. PITTS, Pennsylvania
BART STUPAK, Michigan                MARY BONO MACK, California
GENE GREEN, Texas                    LEE TERRY, Nebraska
CHARLES A. GONZALEZ, Texas           MIKE ROGERS, Michigan
ANTHONY D. WEINER, New York          SUE WILKINS MYRICK, North Carolina
JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina
JOHN BARROW, Georgia
DORIS O. MATSUI, California
KATHY CASTOR, Florida
ZACHARY T. SPACE, Ohio
BRUCE L. BRALEY, Iowa
DIANA DeGETTE, Colorado
JOHN D. DINGELL, Michigan (ex 
    officio)
  


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................
Hon. George Radanovich, a Representative in Congress from the 
  State of California, opening statement.........................
    Prepared statement...........................................
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................
    Prepared statement...........................................
Hon. Eliot L. Engel, a Representative in Congress from the State 
  of New York, opening statement.................................
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, prepared statement....................................

                               Witnesses

Lois Greisman, Director, Division of Marketing Practices, Federal 
  Trade Commission...............................................
    Prepared statement...........................................
    Answers to submitted questions...............................
Sally Greenberg, Executive Director, National Consumers League...
    Prepared statement...........................................
Patricia Acampora, Commission, New York State Public Service 
  Commission, National Association of Regulatory Utility 
  Commissioners..................................................
    Prepared statement...........................................
    Answers to submitted questions...............................
Alie Kabba, Executive Director, United African Organization......
    Prepared statement...........................................
Scott Ramminger, President, American Wholesale Markets 
  Association....................................................
    Prepared statement...........................................

                           Submitted Material

Statement of USTelecom Association...............................
Statement of National Association of Convenience Stores..........
Excerpt of Congressional Record, September 25, 2008, submitted by 
  Mr. Radanovich.................................................


      H.R. 3993, THE CALLING CARD CONSUMER PROTECTION ACT OF 2009

                              ----------                              


                       THURSDAY, DECEMBER 3, 2009

                  House of Representatives,
           Subcommittee on Commerce, Trade,
                           and Consumer Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:09 a.m., in 
Room 2322 of the Rayburn House Office Building, Hon. Bobby Rush 
[Chairman of the Subcommittee] presiding.
    Members present: Representatives Rush, Schakowsky, 
Sarbanes, Butterfield, Space, Engel, Radanovich, Stearns, 
Whitfield, Pitts, Gingrey, and Scalise.
    Staff present: Michelle Ash, Chief Counsel; Tim Robinson, 
Counsel; Angelle Kwemo, Counsel; Anna Laitin, Counsel; Will 
Cusey, Special Assistant; Sarah Fisher, Special Assistant; 
Shannon Weinberg, Counsel; Brian McCullough, Professional 
Staff; Will Carty, Senior Professional Staff; and Chad Grant, 
Legislative Analyst.

 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. Good morning. The subcommittee will now come to 
order.
    This hearing is being convened to consider H.R. 3993, the 
Calling Card Consumer Protection Act of 2009, and the Chair 
wants to take a quick moment just to welcome all who are 
gathered, our witnesses, our--the audience, and also I want to 
welcome all the members to this hearing.
    And the Chair now recognizes himself for 5 minutes for the 
purposes of an opening statement. The pre-paid legal calling 
industry generates more than $4 billion in annual revenues. It 
is a highly-fragmented industry comprised of well-known and 
lesser-known telecommunications companies that are owned and 
operated on public and private networks, resale of the 
telecommunications services, and marketing firms and 
distributors who produce, brand, and deliver the cards to 
retail outlets and stores.
    The Chair wants to take a moment to thank my friend and 
colleague from New York, Mr. Engel, for reintroducing this bill 
in the House. It would significantly improve the truthfulness 
of calling card advertisements and pave new avenues of recourse 
for millions of defrauded and vulnerable classes of consumers 
in this country.
    There is a familiar phrase that has been made infamous by 
the great businessman and showman P.T. Barnum, and he kind of 
succinctly put us in the proper framework for this time. 
``There is a sucker born every minute,'' and these words have 
helped to set the scene for today's hearing.
    Fraudulent calling cards is in the stream of commerce day 
by day. They represent the amount of calling cards that are 
supplied on the card and high applicable fees and charges. They 
misrepresent the amount of the calling minutes that are 
supplied on the calling card and high applicable fees and 
charges, and time the cards may even provide substandard phone 
connection, ineffective pin numbers, and non-functional or 
always-busy customer service contact information.
    H.R. 3993 would remedy many of these problems. It would 
require calling card providers and distributors to advertise 
clearly and conspicuously the relevant and applicable 
information on the cards. Such disclosures would include 
contact information for the card service provider, number of 
minutes applied on the card, and dollar value of the card.
    I want to, again, want to greet all the witnesses who are 
here with us today, and I thank them for taking time out of 
their busy schedules to be here, and I look forward to each and 
every one of your insights and to your views on this particular 
matter of H.R. 3993.
    And allow me to take particular pleasure today to greet Mr. 
Alie Kabba, who is a witness today. Mr. Kabba is the Executive 
Director of the United African Organization. He has worked 
devotedly from the organization's Chicago headquarters on 
behalf of the more than 100,000 African-American women and 
children who now make their homes in Illinois. Again, I want to 
thank each and every one of you for being here today.
    [The prepared statement of Mr. Rush follows:]
    With that I yield back the balance of my time, and now it 
is my distinct honor to recognize the Ranking Member of the 
subcommittee, the gentleman from California, Mr. Radanovich, 
for 5 minutes.

 OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Radanovich. Thank you, Mr. Chairman. I appreciate the 
fact that we are holding this hearing, and last Congress 
similar legislation was ushered through the committee and onto 
the House floor, and only a few short weeks before Congress 
recessed for the term. Doing so reflected our appropriate 
recognition that fraud and deception in the prepaid calling 
card market does exist and that it is necessary to address this 
problem.
    Intentionally taking advantage of consumers, whether they 
are immigrant groups or our military serving overseas with 
prepaid cards that deliver less service than advertised, is no 
different than stealing. If a consumer purchases a calling card 
expecting a certain amount of minutes, minus the advertised 
fees, but later finds out that hidden fees or expiration of 
minutes reduce the value of what they purchased, this is at 
very least deceptive and quite possibly fraudulent. We 
certainly would not accept paying for a full tank of gasoline 
but driving away with only half a tank.
    This is not good for consumers, and it is not good for the 
legitimate businesses who make and sell these cards. Companies 
generally are not opposed to many of the requirements in 
legislation as long as they are relevant and adhered to by our 
competitors. It is often the companies that cannot compete on 
price or service, however, that hide the fees or intentionally 
misrepresent the number of minutes the consumer to actually 
purchasing.
    This has got to stop. Consumers should have the necessary 
information to select the card of their choice and are often 
willing to pay more when they are knowing that they are buying 
a better service. The important point is that the consumers are 
able to choose based on available, truthful information.
    H.R. 3993 is intended to provide additional tools to the 
FDC and to the States to prohibit certain practices, require 
specific disclosures, and enforce violations of the Act. I 
agree it is important to provide meaningful tools to stop 
abusive or fraudulent practices, but given the available time 
to examine the legislation more thoroughly this year than last 
year's end-of-Congress frenetic pace, should take the--we 
should take the appropriate time to move through regular order 
and make necessary changes. As the FTC will testify, they have 
brought a number of cases, and the States have brought over 20 
cases since the spring of 2008. This legislation could be 
helpful as a fraud deterrent, but enforcement of existing law 
will continue regardless of when Congress may enact 
legislation.
    I have concerns regarding certain provisions of the bill 
and in particular the differences between this version and the 
one the committee considered in the last Congress. 
Consolidating enforcement at the FTC is good policy given their 
history of consumer protection and enforcement against unfair, 
deceptive practices, but to be effective it requires a 
legislative change to the existing common carrier exemption 
under the FCA Act, and without that the vast majority of 
prepaid service providers would remain outside the reach of the 
FTC.
    My concern regarding this provision is whether it 
effectively consolidates enforcement under the FTC or whether 
it leaves open the unwanted possibility of dual regulation by 
both the FTC and the FCC, and I hope that we can work to 
clarify this language.
    Additionally and of more concern is to change the permits, 
the States to regulate the same activity as that proposed by 
this legislation. The States can do--that States can do and 
enforce their own laws in this area. As a policy matter, the 
change to remove the preemption while enacting a new Federal 
law is an obvious problem. We could respect States' rights and 
leave it to them to continue to enact and enforce 50 different 
sets of laws, or we can decide we need to have a strong Federal 
law that provides a uniform and consistent regime that benefits 
consumers. Doing both will create conflicts and confusion that 
accompany up to 50 different disclosure requirements and will 
have little corresponding benefit, which is why I support the 
one Federal standard.
    Additionally, there is concern that retail merchants who 
have no direct relationship or control over the disclosures 
requires would be subject to this Act. Mr. Engel's original 
bill defined distributors specifically to not include retail 
establishments that were engaged only in a point-of-sale 
transaction. This clarification is no longer the legislation, 
and I would like to hear the objections and providing--to 
providing such a protection. I am not aware of other instances 
where a retailer is liable for the disclosures on a product it 
merely resells as a merchant.
    I would like to thank Mr. Engel for his commitment to this 
issue, and I look forward to discussing and hope to work on a 
bipartisan manner to improve the legislation. Thank you, Mr. 
Chairman. I yield back.
    [The prepared statement of Mr. Radanovich 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Rush. The Chairman thanks the gentleman.
    The Chair now recognizes the gentleman from Ohio, Mr. 
Space, for 2 minutes for the purpose of an opening statement.
    Mr. Space. I will waive my opening statement, Mr. Chairman. 
Thank you.
    [The prepared statement of Mr. Space 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Rush. The Chair thanks the gentleman.
    The Chair now recognizes the Vice-Chair of the 
subcommittee, Ms. Schakowsky, for 2 minutes.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman. I am very pleased 
to be here today to discuss the Calling Card Consumer 
Protection Act, and I congratulate my colleague, Mr. Engel, for 
introducing it and the Chairman for holding this hearing.
    This bill moved very quickly in the Congress, passing the 
House easily by voice vote. I hope that we can move as quickly 
this time around as--on this important consumer protection 
bill. Today more than 276 million American households and 89 
percent of the U.S. population have cell phones, but prepaid 
calling cards remain a huge industry, worth $4 billion in 2007. 
They are particularly popular among college students, as well 
as military personnel and immigrant communities, people who 
frequently make international calls.
    My district is one of the most diverse in the Nation. 
Almost one-third of my constituents are foreign born, first 
generation American or first generation American residents. So 
calling cards are very, very important to them.
    Unfortunately, the calling card industry is full of 
deceptive advertising and hidden fees. The Illinois Attorney 
General, Lisa Madigan, is currently investigating about a half 
dozen companies for their harmful practices. A card might say 
it is worth 250 minutes, but you could get 200 or 100 once you 
actually use it or even zero minutes. Some cards come with 
phone numbers that never connect or send you to a busy signal. 
Too often calling cards have no information listed about 
connection fees, varying rates per minute, a charge each week 
that you don't know when you use the card, or even fees for 
just hanging up. Such abusive and unfair practices must stop.
    I look forward to hearing from our witnesses, whether they 
believe the Calling Card Consumer Protection Act is sufficient 
or whether we need to go even further. I thank you, Mr. 
Chairman, and I yield back the balance of my time.
    Mr. Rush. The Chair now recognizes the gentleman from 
Kentucky, Mr. Whitfield, for 2 minutes for the purposes of an 
opening statement.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. Thank you, Mr. Chairman. While we can see what 
a difference a majority has on the Republicans and Democrats 
because we all supported the Engel bill. We passed it, I think, 
by voice vote in the last Congress. Wasn't that right, Mr. 
Engel? Yes?
    And now I have to say that as much as I support the intent, 
I am a little concerned, obviously, with the Federal 
preemption, and that is the area that I think many of us on 
this side are concerned. I know that Mr. Barton has also 
experienced some concern with that, too.
    This pre-card calling industry is a billion dollar 
industry. There are some bad actors. Mr. Engel is to be 
commended for his bill. He is simply asking for accurate and 
reasonable disclosure of the terms and conditions of prepaid 
calling cards. So what could be wrong with that? Nothing.
    But let me just give you one of the concerns that I have. 
Unlike the one he introduced in last Congress, the new version 
of the Calling Card Consumer Protection Act does not, does not, 
let me repeat, contain Federal preemption. Instead, this bill 
allows States to enact requirements, each and every State, that 
provide equal or greater protection than the Federal standard.
    Given the small size of calling cards and the difficulties 
involved with having to fit lengthy disclosures onto the cards, 
some in multiple languages, in a clear and conspicuous manner 
companies may not be physically able to comply with both 
Federal and multiple-State disclosure requirements.
    So we have 50 States, you are going to have 50 
requirements, and you are going to have to reconfigure for each 
of those States. So I think we need one unified set of rules 
that will apply all players, to all players on notice, really 
outlining what their responsibilities are to consumers. I think 
Mr. Engel would probably agree with that, and so I think this 
is a point we can work on together in a bipartisan manner to 
address this issue before we mark up.
    So I would urge the Chairman, Mr. Waxman, and the Ranking 
Member, Mr. Rush, to consider that we have a well-intentioned 
bill that is something that everybody agrees with, but we need 
to have an understanding that in the area of preemption we 
cannot have 50 States complying with all these multiple 
requirements for disclosures on the card and perhaps in 
multiple languages.
    So with that, Mr. Chairman, I would say that this is a very 
good bill with that one reservation. Thank you.
    Mr. Rush. The Chair now recognizes the gentleman from North 
Carolina, Mr. Butterfield, for 2 minutes.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Thank you very much, Mr. Chairman, for 
holding this hearing, and thank you, Mr. Engel, for offering 
it. It is a good bill, and I support it.
    The bill increases the protections for consumers and will 
go far to ensure those who use prepaid calling cards know what 
they are buying and what fees and charges are associated with 
the use. I say all of the time, I represent the fourth poorest 
district in the United States of America, where the 
unemployment rate is just going out of the sky. Many of my 
constituents, some of the most--are the most poorest in the 
Nation, and prepaid calling cards are used often by my 
constituents to communicate with their families. These are the 
same workers that clean our schools and harvest our food, and 
they are the same people who are being preyed upon by 
despicable prepaid calling card companies.
    Large calling card companies sell these cards in various 
minute amounts, and what is not clearly disclosed to the 
consumer is the hefty connection or hang-up fees and other fees 
associated with each call. A $20 calling card promising to 
deliver 100 minutes, for example, could ultimately only yield a 
small percentage of the minutes. In fact, a 2008, study found 
that of the 45 prepaid cards surveyed, only 60 percent of 
advertised minutes were actually delivered. These predatory 
actions force hardworking people into a cycle of being 
victimized by the fraud and deception practiced by the prepaid 
calling card companies.
    H.R. 3993 provides greater transparency for prepaid calling 
card consumers. It is a good bill. I plan to support it, and 
thank my friend, Mr. Engel, for offering it.
    I yield back.
    Mr. Rush. The Chair now recognizes the gentleman from 
Pennsylvania, Mr. Pitts, for 2 minutes.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. Thank you, Mr. Chairman. Thank you for holding 
this hearing on H.R. 3993, the Calling Card Consumer Protection 
Act of 2009.
    Prepaid calling cards are used by scores of people in the 
United States, from college students to people with family and 
friends abroad, to military personnel. American consumers spent 
roughly $4 billion on cards in 2007, however, a number of 
studies have found that there are serious flaws in some of the 
cards. Many do not deliver the full number of advertised 
minutes. In addition, cards sometimes lead to poor phone 
connections and provide toll free and other call-in numbers 
that are busy or do not work.
    To address these problems last Congress the Energy and 
Commerce Committee considered H.R. 3402, which passed by voice 
vote on the floor. The bill we are considering today is similar 
to last year's, but there are a number of concerns with H.R. 
3993 that I hope we can reconcile.
    Unlike the sent version of this bill, H.R. 3993 does not 
explicitly limit the authority of the FCC, where the FTC has 
jurisdiction under the bill. I believe it would be harmful to 
place duplicative and overly-burdensome regulation on industry 
by mandating they be subject to both the FCC and the FTC.
    Additionally, preemption is essentially eliminated in H.R. 
3993. The previous legislation only permitted continuation of 
State laws that are identical to the Federal law. Under H.R. 
3993 states are now allowed to enact requirements that provide 
equal or greater protection than the Federal standard. Finally, 
not exempting retail merchants from the definition of 
distributor calls into question if the retail merchant industry 
is now liable for the same card disclosures required of the 
service providers and distributors.
    I hope that many of these concerns can be addressed before 
we move the bill. I look forward to hearing from the witnesses 
today, and I yield back.
    Mr. Rush. The Chair now recognizes the gentleman from 
Maryland, Mr. Sarbanes, for 2 minutes.
    Mr. Sarbanes. I waive my opening.
    Mr. Rush. The Chair thanks the gentleman.
    The Chair now recognizes the gentleman from Kentucky for 2 
minutes.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Mr. Chairman, thanks very much, and we 
appreciate your having his hearing on this important 
legislation.
    The Federal Trade Commission estimates that approximately 
half of the $4 billion of industry revenue from selling these 
cards can be attributed to fraudulent gains, and so I do 
believe that this legislation is a step in the right direction 
but like some others on the committee I have three basic, 
primary concerns.
    First of all, any industry operating in inter-State 
commerce I think it is imperative that there be Federal 
preemption, because the last thing we want to happen is for a 
company to have to deal with 50 different regulations on a 
particular card.
    The second thing that I am concerned about in this 
legislation is the possibility of dual regulation between the 
FCC and the FTC. We all know the difficulty with bureaucracies 
and without a clear, definitive understanding of which agency 
will be responsible, I think that is going to be a problem as 
well.
    And then the third thing that I do have a concern about is 
that the retailers who sell these cards, I think it is 
imperative that if they are knowingly involved in fraudulent 
activity, then obviously they should suffer the consequences, 
but I think it is very easy for retailers to sell these cards 
and not be aware of the fraudulent activity. And so I think 
that we should take steps to clarify that and make sure that 
they are not held liable if they are not knowingly aware of it.
    But I want to thank the Chairman for his continued 
leadership in this effort and for the Ranking Member as well, 
and I yield back my 9 seconds.
    [The prepared statement of Mr. Whitfield 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Rush. The Chair thanks the gentleman.
    Now, seeing that there are no other witnesses, no other 
members who needs to be recognized for opening statements, the 
Chairman now requests unanimous consent that the author of the 
bill, Mr. Engel, be allowed to sit in on the committee hearing 
and participate in the committee hearing, and he will be able 
to ask questions at the conclusion of the questions by the 
members of the committee.
    Hearing no objections, so ordered.
    And the Chair now recognizes for 5 minutes the author of 
the legislation, Mr. Engel.

 OPENING STATEMENT OF HON. ELIOT L. ENGEL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEW YORK

    Mr. Engel. Well, thank you very much, Mr. Chairman. I want 
to thank you for holding today's hearing on my legislation, 
H.R. 3993, the Calling Card Consumer Protection Act, and for 
allowing me to participate as a member of the Energy and 
Commerce Committee but not a member of this subcommittee. I 
would also like to welcome Commissioner Acampora from my home 
State of New York for attending this hearing as well.
    And I appreciate the comments made by all of my colleagues 
in support of the bill, even though some may have some 
questions about certain parts of it. As many of us know calling 
cards are an invaluable resource for people who don't have long 
distance telephone service in their home or those who make 
frequent overseas calls. Calling cards that provide the 
services the companies advertise can save consumers a great 
deal of money when they call home, but unfortunately as members 
have said this, as we are seeing over and over again, many 
companies fail to keep their advertised terms.
    About 3 years ago I began hearing from a number of 
constituents regarding their prepaid calling cards. They were 
contacting me because their calling cards failed to provide the 
number of minutes that were advertised. In fact, many were not 
even close to delivering the promised number of minutes.
    In independent tests calling cards were shown to provide 
far fewer minutes than were advertised. One study found that on 
average the caller only received 60 percent of the minutes 
guaranteed by the card. I recently read that the prepaid 
calling card industry takes in $4 billion a year in revenue. If 
the cards are only providing 60 percent of the minutes, we can 
all do the math. This deception is costing consumers and honest 
companies hundreds of millions of dollars a year.
    Calling card fraud harms segments of the population as my 
colleagues have pointed out who are among the most vulnerable 
to being victimized by unscrupulous companies, only seeking to 
make a quick profit. These companies are known to target poor, 
minority, and immigrant populations, and they don't stop there. 
Even our soldiers in Iraq and Afghanistan have been preyed upon 
by deceptive practices of calling card companies.
    My legislation will put a stop to these practices. It would 
also provide that the government is able to enforce the 
legislation to try to get rid of the dishonest companies. 
Calling cards are an extremely useful product for consumers, 
and I don't want to see honest companies punished. There is 
absolutely no reason why a company cannot deliver what is 
promised and still turn an honest profit. If consumers know 
that the card they purchased will provide the full amount of 
calling time that is advertised, this will benefit both 
consumers and the marketplace.
    And let me just say I think that industry here should 
support this bill, not get bogged down with ridiculous reasons 
for opposing it. I commend those segments of the industry that 
are working with us, but the ones that are dragging their feet, 
if they have nothing to hide, if their calling cards are not 
fraudulent, then they should enthusiastically support this 
legislation.
    And I want to thank Senator Nelson of Florida, who is 
sponsoring this bill in the Senate as well. I would strongly 
encourage the members of the committee, of the subcommittee, to 
support H.R. 3993.
    I will show flexibility in working with members to see if 
we can all come to a conclusion, but we don't want to water 
down the bill so much that it becomes ineffective. So I think 
that is the counter to what some of my colleagues have pointed 
out, but I do appreciate the bipartisan support for this bill, 
and I strongly urge members of the committee to support it, and 
I thank you, again, Mr. Chairman, for holding this hearing 
today and allowing me to participate as a subcommittee member, 
and I yield back the balance of my time.
    Mr. Rush. The Chair thanks the gentleman.
    Now it is my distinct honor and privilege to welcome our 
witnesses for today's hearing. Beginning on my left we have 
with us Ms. Lois Greisman. I think I am pronouncing that right. 
Ms. Greisman is the Director of the Division of Marketing 
Practices for the Federal Trade Commission. Next to Ms. 
Greisman is Ms. Sally Greenberg, who is the Executive Director 
of the National Consumers League.
    And next to Ms. Greenberg is Ms. Patricia Acampora. She is 
the Commissioner of the New York State Public Service 
Commission, and she is a member of the National Association for 
Regulatory Utility Commissioners. Did I get that right? And 
next to Ms. Acampora is Mr. Alie Kabba. He is the Executive 
Director of the United African Organization, and then lastly 
but not least Mr. Scott Ramminger, who is the President of the 
American Wholesale Marketers Association.
    The Chair wants to thank each and every one of you for 
appearing before this hearing, and it is the practice of this 
subcommittee to swear in the witnesses, and I will ask that if 
you would stand and raise your right hand.
    [Witnesses sworn.]
    Mr. Rush. Please let the record reflect that all the 
witnesses have answered in the affirmative.
    And now it is--the Chair recognizes Ms. Greisman for 5 
minutes for the purposes of opening statements.

  TESTIMONY OF LOIS GREISMAN, DIRECTOR, DIVISION OF MARKETING 
PRACTICES, FEDERAL TRADE COMMISSION; SALLY GREENBERG, EXECUTIVE 
    DIRECTOR, NATIONAL CONSUMERS LEAGUE; PATRICIA ACAMPORA, 
COMMISSION, NEW YORK STATE PUBLIC SERVICE COMMISSION, NATIONAL 
 ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS; ALIE KABBA, 
  EXECUTIVE DIRECTOR, UNITED AFRICAN ORGANIZATION; AND SCOTT 
  RAMMINGER, PRESIDENT, AMERICAN WHOLESALE MARKETS ASSOCIATION

                   TESTIMONY OF LOIS GREISMAN

    Ms. Greisman. Thank you very much. Good morning, Chairman 
Rush, Ranking Member Radanovich, members of the subcommittee. I 
am Lois Greisman. I am the Associate Director of the FTC's 
Division of Marketing Practices, and I am very pleased to 
appear before you today.
    As you know, the FTC's formal views are presented in its 
written testimony. My oral remarks and any answers to questions 
you may have reflect my own views and not those of the 
Commission or any individual commissioner.
    I would like to take my time to update you on the FTC's 
prepaid phone card initiatives and to discuss the Commission's 
support for H.R. 3993.
    One need look only at the enlarged poster to your left, 
which was produced by defendants in one of the actions that the 
FTC brought, to see how problematic disclosures are in this 
industry. As is typical, the poster makes large, bold claims 
about the number of calling card--of calling minutes consumers 
purportedly will receive in calls to specific destinations.
    For example, this poster boasts that consumers will receive 
124 minutes to the Dominican Republic, 60 minutes to El 
Salvador. In fact, the FTC's testing showed that the card 
advertised here delivered on average only about half the 
advertised minutes. Now, that the card failed to deliver was 
due in no small part to an array of hefty hidden fees. Buried 
at the bottom of the poster in fine print that even if I were 
directly in front of it I would be strained to be able to read, 
are lines of very small print that is so small and wording so 
vague as to be nearly incomprehensible.
    So if an advertisement says that a card will provide 200 
minutes of calling time to a particular country, it should do 
just that. Providing 100 minutes or less is unacceptable and 
indeed, it is illegal. Similarly, hidden, incomprehensible 
connection, disconnection, maintenance, and other fees or 
charges are illegal.
    Last year the Commission testified on the earlier version 
of H.R. 3993. Since then the Commission has continued to 
scrutinize the prepaid calling card industry while working very 
closely with its 35-State partners and the FCC through the 
Federal State Task Force the Commission created back in 2007. 
As you have all noted, users of prepaid phone cards, whether 
recent immigrants, members of the Armed Services, students, or 
anyone of us sitting here, are entitled to receive what they 
pay for.
    Several States, most notably Florida, Illinois, New Jersey, 
Texas, and California, have been particularly active in this 
area, investigating or filing many actions against both 
distributors and carriers to ensure that the marketing of 
prepaid phone cards is truthful and accurate. And at the same 
time the FTC has continued its law enforcement efforts, 
targeting prepaid phone card distributors, reaching settlements 
in two cases with nearly $3.5 million in monetary relief and 
strong injunctive relief, and just this past July the 
Commission sued another major distributor, Diamond Phone Card 
and its principles, making similar allegations as in the other 
cases.
    Now, as always, complementing the FTC's law enforcement 
efforts is a targeted consumer education campaign in both 
English and Spanish to ensure that purchasers of prepaid phone 
cards know what the cards are supposed to do and know what to 
look for when making a purchase.
    Turning now to the bill. H.R. 3993 is designed to provide 
accurate and improved disclosures and further providing the 
Commission with civil penalty authority and creating the 
mechanism for States to enforce the law. It also would provide 
a strong set of tools to combat fraud in the prepaid phone card 
industry. Critically, the legislation creates a carve-out to 
the common carrier exemption that would allow the Commission to 
sue phone card providers, namely carriers, and obtain civil 
penalties and other relief against them. Eliminating this 
common carrier exemption for these purposes will permit the FTC 
to target the critical segment of the industry that in many 
cases, no doubt, bears liability for the widespread fraud in 
this industry.
    Indeed as I have already mentioned, many of the State 
actions have targeted carriers, but--and at the risk of 
sounding ungrateful, the bill's exemption for certain prepaid 
wireless phone services is problematic. It creates a welcome 
sign for the worst actors in the industry, inviting them to 
migrate their business to prepaid wireless products. The nature 
of the wireless products and services, as well as the 
advertising and marketing for them, are strikingly similar to 
those outside of the wireless context. The same rules of the 
road should apply.
    Thus, taking prepaid wireless services out of the bill's 
regulatory coverage does not seem sensible and creates a strong 
incentive for mischief. I urge the subcommittee to reconsider 
this point.
    I very much look forward to working with the subcommittee 
and to answering any questions you may have. Thank you.
    [The prepared statement of Ms. Greisman 
follows:]*************** INSERT 1 ***************
    Mr. Rush. Thank you very much.
    The Chair now recognizes Ms. Greenberg for 5 minutes for 
the purposes of opening statement.

                  TESTIMONY OF SALLY GREENBERG

    Ms. Greenberg. Thank you very much, Chairman Rush and 
Ranking Member Radanovich. Good morning. My name is Sally 
Greenberg. I am Executive Director of the National Consumers 
League.
    The National Consumers League was founded in 1899, which 
makes us the oldest consumer organization in the United States. 
As part of our longstanding interest in protecting consumers 
from fraudulent practices, we operate a fraud center where we 
accept complaints and educate consumers directly about 
fraudulent practices. Last year we processed nearly 20,000 
complaints. Included in those complaints were concerns that 
consumers had about prepaid calling cards.
    When we appeared last before this committee in September of 
2008, we equated the prepaid calling card marketplace with the 
wild west. A little over a year later we are sad to say that 
the situation for consumers remains more Gunsmoke than Little 
House on the Prairie. We believe that H.R. 3993 will help 
protect consumers from fraud by strengthening disclosure 
requirements in these cards.
    While we would have liked to have seen outright 
prohibitions on a number of the most egregious business 
practices, including high billing increments, pricy connection 
fees, and finding mandatory arbitration clauses, we are 
heartened that the bill explicitly protects the rights of 
States to develop strong consumer protections.
    The rapid growth in the prepaid calling card industry, 
which is expected to bring in somewhere between $2 and $4 
billion in annual revenues by 2012, coupled with loose 
regulation and often lacks enforcement, has enabled consumer 
fraud to flourish. While these cards provide users with an 
alternative means of calling friends and family, many card 
providers employ false and deceptive practices and impose 
unconscionable terms.
    Part of the problem we believe is the ease with which con 
artists can enter the industry. According to Pablo Bressan, a 
Miami-based telecom consultant and prepaid calling card 
distributor, it costs as little as $20,000 to buy the long 
distance minutes and backend consumer platforms to get into--
computer platforms to get into the business. Some companies do 
not even go that far. They simply resell the cards made by 
others.
    The potential for fraud in the prepaid calling card 
industry is so well known it even merited a mention as a 
preferred scheme on HBO's ``The Sopranos,'' with Tony Soprano 
calling the scheme he was running, ``blankety blank beautiful 
because it is so easy to run the scam.'' Fraud is fraud. If a 
car is sold with the promise of a sunroof and chrome wheels, it 
better have a sunroof and chrome wheels, and if a phone card 
promises 500 minutes to El Salvador, it should deliver those 
500 minutes.
    The ultimate victims of fraud and deception in the prepaid 
calling card market are the most vulnerable consumers; 
immigrants, working poor, military families, and those with 
lower incomes. By some estimates Hispanic consumers alone may 
have been losing $1 million per day because of the fraudulent 
phone cards. Independent analysis by the Hispanic Institute and 
the FTC found that the average calling card only delivered 
between--cards only delivered between 50 and 67 percent of the 
minutes advertised. The cost per minute rates for prepaid phone 
cards can be up to 87 percent higher than expected, and an 
expected call rate of 15 cents per minute, for example, may end 
up costing 28 cents per minutes.
    Now, some attorneys general had done a commendable job in 
prosecuting fraudulent practices, including in Florida and 
Texas. The Federal Trade Commission has also conducted 
investigations as Ms. Greisman has pointed out and has worked 
very closely with the States, and we commend them for that. 
While the FTC and State actions in this area have certainly 
benefited consumers, we feel that--we fear that millions of 
dollars in losses continue to flow into the pockets of 
scammers. And also that calling card fraud too often goes 
under-reported or unreported, and that is why we need basic 
federal protections to stem the tide of the many deceptive 
practices in the industry.
    NCL believes that giving the FTC greater authority as 
called for in H.R. 3993 would help to level the playing field 
for providers. As called for in the bill, the regulations 
should also include requirements that providers and 
distributors disclose the terms and the conditions of the cards 
and list the per-minute rates, preferred international 
designation rates, and any fees or surcharges. In short, we 
believe consumers should know what they are buying, what--they 
get what they paid for, and have an accessible avenue for 
redress if they are harmed.
    We want to add some recommendations onto what is already 
available in H.R. 3993. First with regard to disclosure, we 
recommend that this section of the bill be expanded to include 
a requirement that every calling card provider publish a Web 
site listing the cards' rates, taxes, fees, and surcharges. 
Currently Section 3A of H.R. 3993 only requires that providers 
list rates if they maintain a Web site.
    Secondly, if the GAO study mandated in Section 8 of the 
bill presents evidence indicating that greater disclosure has 
not curbed the abuses, we recommend further action be 
considered by this committee. And specifically, we would like 
the committee to consider requiring--one, requiring all credit 
card providers to be licensed and post a bond before marketing 
cards to consumers. Such a move would address the issue of the 
extreme ease of entry into the industry, which invites 
fraudsters.
    Secondly, we would like to require all providers to--we 
think there ought to be a requirement that providers have a 24-
hour, 7-day-a-week toll-free consumer line staffed by live 
representatives that are fluent in the language the card is 
marketed in.
    Third, we would like to see a provision requiring sellers 
to inform consumers via Web site or toll-free phone number of 
any proposed changes in terms and conditions with the consumers 
given a chance to reject those changes and receive a refund 
without a fee.
    Fourth, we would like to see a requirement for uniform 
terms in all prepaid calling card contracts so the consumers 
can more easily comparison shop, and finally, we would like to 
see a prohibition on binding mandatory arbitration and 
preserving a private right of action.
    Thank you, Mr. Chairman. We look forward to answering any 
questions and working with the committee to see this 
legislation enacted.
    [The prepared statement of Ms. Greenberg 
follows:]*************** INSERT 2 ***************
    Mr. Rush. The Chair thanks Ms. Greenburg.
    And now the Chair recognizes Ms. Acampora for 5 minutes for 
opening statements.

                 TESTIMONY OF PATRICIA ACAMPORA

    Ms. Acampora. Thank you, Chairman Rush, Ranking Member 
Radanovich, Mr. Engel, and members of the committee. My name is 
Patricia Acampora. I am Commissioner with the New York State 
Public Service Commission. I am testifying today for the 
National Association of Regulatory Utility Commissioners or 
NARUC.
    NARUC represents the agencies in each of your States that 
have oversight responsibilities for telecommunications. These 
commissioners are, like you, all focused on what is best for 
your State and your constituents. On behalf of NARUC I want to 
commend Chairman Rush, Ranking Member Radanovich, and Mr. 
Engel, my fellow New Yorker, for their leadership on this 
important issue. We want to specifically thank each of you, in 
particular, your excellent staffers, Britt McArrid and Anna 
Laitin.
    I have submitted written testimony, but in my oral remarks 
I will briefly touch on why this is a good bill and then 
provide a few suggested improvements.
    H.R. 3993 is a good bill. Abuse in the prepaid calling card 
market is well documented. By definition the fraud and 
inadequate disclosure problems targeted cannot be handled by 
market forces. That is why reputable providers that make up the 
heart of this industry should embrace the joint Federal, State 
enforcement regime presented.
    The State--the Federal, State partnership established in 
Sections 5 and 7 of the bill is critical. It maximizes the 
avenues for consumer redress. It assures States don't waste tax 
dollars reshuffling existing enforcement regimes. It allows 
more protective State fines and remedies to remain intact. It 
leverages State and Federal enforcement activity to produce the 
greatest possible deterrents to bad actors. There is never a 
good reason to take State consumer cops off the beat or to 
limit your constituents' avenues for redress. H.R. 3993 does 
neither.
    Significantly, the bill also mandates disclosure of all 
information that consumers need to make informed decisions and 
also Federal and State authorities need to investigate bad 
actors. This legislation is, in fact, an excellent template for 
how Federal and State authorities can best partner to protect 
consumers. This is a good bill, and NARUC supports it.
    That said, I do have a couple of personal suggestions and 
one NARUC proposal to further improve what is already a very 
good bill.
    NARUC suggests changing the definition of prepaid calling 
card and calling card service. The current definitions 
reference existing regulatory classifications that are 
increasingly outdated as technology evolves. Definitions that 
reference specific technology is like void, and old 
classifications can only serve as target for bad actors to find 
loopholes, something history has conclusively demonstrated they 
are very, very good at.
    The subcommittee should focus on a functional definition 
that is not tied to any particular technology like the one used 
in Senate companion bill S.562. That approach was also used by 
Representative Engel in H.R. 1258.
    I also have a couple of personal recommendations. My 
Commission and others have difficulty pursuing prepaid calling 
card complaints because the rates and fees information related 
to the card is printed on the packaging, which is normally 
thrown away. I would like to commend Congressman Engel as this 
bill fills the gap by requiring that disclosure of rates and 
fees, as well as contact information, be printed on the calling 
card itself, not just the packaging.
    Further, if the disclosure printed on the card is obscured 
by the packaging, this legislation requires the disclosure also 
be printed on the packaging. However, I remain concerned that 
providing full disclosure on the calling card itself may result 
in unreadable print size. To improve the readability, I suggest 
service providers be required to include all rates and fees on 
a piece of cardstock included with the calling card. This card 
should be the same size as the calling card and have the 
phrase, consumer, do not discard, printed on both sides in 
large type.
    Another personal recommendation would be to require all 
calling card providers to maintain a Web site with information 
on the rates, terms, and conditions of the card and the Web 
site to be displayed on the card. As currently drafted, the 
bill only requires online disclosure if a provider maintains a 
Web site. This opens the door to abuse. It is not unreasonable 
to require a provider to maintain a Web site outlining rates, 
terms, and conditions. It is certainly not expensive nor 
difficult.
    Thank you again for allowing me to have this opportunity to 
testify.
    [The prepared statement of Ms. Acampora 
follows:]*************** INSERT 3 ***************
    Mr. Rush. The Chair thanks Ms. Acampora.
    Now the Chair recognizes Mr. Kabba for 5 minutes for the 
purposes of opening statement.

                    TESTIMONY OF ALIE KABBA

    Mr. Kabba. Mr. Chairman and the subcommittee, I am Alie 
Kabba, Executive Director of the United African Organization 
and the Vice President of the Illinois Coalition for Immigrant 
and Refuge Rights. Thank you very much for the opportunity to 
share my perspectives on prepaid telephone cards. This hearing 
is very timely.
    The United African Organization and the Illinois Coalition 
for Immigrant and Refuge Rights recognized that prepaid phone 
cards are often the only means for immigrants from Africa, 
Asia, Latin America, and the Caribbean to stay in touch with 
family members abroad. The cards are generally marketed through 
ethnic stores in neighborhoods with significant immigrant 
populations. They are easily accessible and on the surface 
cheap compared to rates by major providers. However, 
appearances are often deceiving, particularly for consumers 
with limited English proficiency.
    Prepaid phone cards too often do not provide the actual 
minutes advertised or announced due to a myriad of fees. 
Limited English-proficient consumers, including immigrants, 
refuges, and the low income, are faced with unnecessarily 
small, fine print to decipher as usage fees. By all accounts 
prepaid phone cards are predominantly used by some immigrants 
who can't qualify for phone service from major providers like 
AT&T and Verizon because they lack needed documentation or they 
do not have credit history.
    Alas, Mr. Chairman, this vulnerable group of undocumented 
consumers of prepaid phone cards is the least likely to 
complain about poor customer status, deceptive practices, or 
deficiencies as the user of the cards. Fees may not always be 
fully disclosed, and even if they are disclosed, they usually 
are not understood. When you factor in the problem with low-
completion rate of calls, hidden fees can easily account for a 
hefty portion of the cost per call.
    Short expiration dates have become a practice, presumably 
to increase calling card sales. Unsuspecting consumers are out 
of minutes if they hold onto the card beyond the short 
expiration dates. Immigrant customers are likely to buy a few 
extra cards in case of a family emergency in faraway places 
like the Democratic Republic of Congo or Trinidad and Tobago. 
The short expiration dates often leave customers with worthless 
cards due to no fault of their own.
    Short expiration dates are sometimes related to yet another 
hidden problem with prepaid phone cards. Some calls do not 
simply reach their destinations. An unsuspecting customer may 
try repeatedly over an extended period of time to reach their 
loved ones in say Bolivia or Liberia without giving much 
attention to the expiration dates. Consequently, they are hit 
with a double whammy of losing their money and not being able 
to talk to their loved ones abroad.
    Cost-per-minute rates are up to higher than those 
advertised. The joke in the community is that it does not 
matter whether the prepaid phone card is marketed under the 
brand name of African Safari, African Kilimanjaro, or African 
Sky. The actual cost per minute is as mysterious as the night 
sky over the Sahara Desert. In other words, prepaid calling 
cards are like books whose covers tell you nothing about their 
context. You simply hope and pray to the Holy Spirit that you 
have your money's worth.
    And to add insult to injury, Mr. Chairman, customers have 
no recourse to lodge their complaints. Even in the rare 
instance is where you can reach a customer service department, 
customer service personnel may not be available or their 
customer service department speak the language of the 
customers. Since a significant percentage of their customers 
consist of limited English proficient households, with at least 
one relative aboard, it flies in the face of logic that many 
prepaid phone card provides do not have customer service 
departments or departments with linguistically-competent staff. 
This lack of commitment to customers, customer needs implies a 
cynical business strategy, relying on the captive customers who 
will accept cutthroat rates and poor service because they have 
no viable alternatives.
    There is the perennial complaint about billing increments, 
the units the companies use to deduct minutes. For example, if 
using one bill increment on a5-cent-per-minute card, they 
deduct 5 cents for the call even if the call lasts for 1 minute 
or just 30 seconds. If the card applies a 5 billing increment, 
that same 30-second call could cost 25 cents. Clearly, the 
customer ends up with fewer minutes than previously advertised.
    It is crystal clear that the empirical basis of the above 
consumer complaints point to one conclusion. Information 
provided by prepaid phone card issuers is often confusing, 
incomplete, and deceptive.
    In conclusion, in requiring accurate and reasonable 
disclosure of the terms and conditions of prepaid telephone 
calling cards and services, we strongly believe that H.R. 3993 
addresses all pertinent consume complaints in our diverse 
immigrant and low-income communities.
    Furthermore, we believe that careful wording of what is 
meant by fruitful disclosure of minutes available is imperative 
if per call and periodic fees are allowed. If fees are allowed, 
there must be standardization of terms and only one term for 
each fee. Consumers shall have better information prior to 
purchase. Prepaid phone card providers can facilitate this 
process by using simple, plain English.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kabba 
follows:]*************** INSERT 4 ***************
    Mr. Rush. The Chair thanks the gentleman.
    The Chair now recognizes for 5 minutes Mr. Ramminger for 
the purpose of opening statement.

                  TESTIMONY OF SCOTT RAMMINGER

    Mr. Ramminger. Thank you, Mr. Chairman. I am Scott 
Ramminger, President of American Wholesale Marketers 
Association. Our association represents distributors to 
convenience stores across the country. Our members supply about 
$85 billion worth of product through convenience stores like 7-
11, for example.
    Simply put, they purchase products from manufacturers, they 
purchase snacks and candy and tobacco products from the 
manufacturers, they aggregate that product and deliver it and 
sell it to the convenience stores, and of course, one of the 
things that they do along with the consumable products is 
supply some of these prepaid calling cards, which they purchase 
from the manufacturers of those cards.
    On behalf of AWMA I would like to thank the subcommittee 
for holding the hearing and for working to ensure that 
consumers are protected from unfair and deceptive practices 
with respect to these cards. We support that goal 
wholeheartedly, however, we would like to urge that any 
legislation ultimately approved by the committee include 
language that imposes liability for false labeling or 
advertising on our member distributors only if they know about 
this falsity. Unfortunately, the legislation currently before 
the committee contains no such provision providing this 
necessary protection for law-abiding distributors.
    Under the current legislation H.R. 993, a distributor, much 
like a retailer, would be held liable and could be punished 
simply by acting as a conduit, purchasing these cards from the 
manufacturer and supplying them to the convenience stores, even 
if the distributor was completely unaware that there was any 
sort of discrepancy or problem with the cards.
    This would create an unfair burden of liability for the 
distributors, and I want to urge the committee to ensure that 
the legislation promoting the consumer protection on the 
prepaid calling cards includes protection for the law-abiding 
distributors who unwittingly could be acting as go-betweens on 
these products.
    The H.R. 993 would add the subject of calling cards to the 
Federal Trade Commission Act, directs the FTC to write a rule 
governing calling cards, and spells out the consumer 
disclosures that calling card vendors must provide. The 
penalties for violation of the FTC rules or injunctions, money 
damages, and fines. The bill gives States Attorney Generals 
similar authority. We believe that it is only fair that 
wholesale distributors are exempt from liability for incorrect 
disclosure if the distributor has no control over the scope or 
services that the manufacturer has delivered.
    While it is true that a distributor could tell whether or 
not there was a clear and conspicuous notice on the card about 
fees and minutes, the distributor would have no way of knowing 
whether, in fact, the card had the correct number of minutes on 
it or not.
    In previous Congress a similar bill on this issue, H 3402, 
addressed the problem by making it unlawful for the distributor 
to distribute the cards if the distributor knows that the 
prepaid telephone card provides fewer minutes than the number 
promoted or advertised. As I said, unfortunately, this new bill 
does not have this much-needed provision.
    On behalf of all members of the American Wholesale 
Marketers Association, I would like to offer the following fix 
aimed at ensuring the fairness and reasonableness of the 
measure.
    Section 2(4) defines prepaid calling card distributor. This 
section could be amended by adding the following clause at the 
end. But such termed as not include distributors who sell such 
cards in the same form and packaging as acquired from a prepaid 
calling card service provider or distributor.
    Alternatively, a provision could be added to the directions 
given to the FTC that would read, in promulgating each such 
regulation, the Commission shall not issue regulations which 
hold the prepaid calling card distributor liable for deceptive 
disclosure of services or rates which the distributor was 
unable to know or control.
    And just--I would just like to add, I think there is some--
a little bit of nomenclature problem perhaps, because sometimes 
our members who are real wholesale distributors who are 
purchasing typically goods, you know, canned goods or candy 
from a manufacturer and reselling it, we refer to as 
distributors. But--and sometimes the makers of these cards are 
referred to as distributors. That is--we are talking about two 
different sorts of distributors entirely. Our guys are not 
buying the minutes and producing the cards. They are buying the 
cards from someone and simply selling them along with other 
goods to the retailer.
    I would again like to commend the subcommittee for these 
efforts. It is clearly an important issue. I represent small 
businesses, and I clearly can appreciate this significant 
problem, and I hope you will consider our concerns as you go 
forward on this important issue. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Ramminger 
follows:]*************** INSERT 5 ***************
    Mr. Rush. The Chair thanks you, and the Chair thanks all of 
the witnesses for their fine opening statements.
    Before we begin our line of questioning, I request 
unanimous consent--I am requesting the submission of two items 
that were submitted to the subcommittee for entry into the 
record of today's hearing. Item number one is a statement for 
the record of Mr. Walter B. McCormick Jr. He is the President 
and CEO of the U.S. Telecom Association, and the second item is 
the statement and the comments of Mr. John Eichberger. He is 
the Vice President of the National Association of Convenience 
Stores.
    Hearing no objection so ordered.
    [The prepared statement of Mr. McCormick 
follows:]*************** INSERT 6 ***************
    [The prepared statement of Mr. Eichberger 
follows:]*************** INSERT 7 ***************
    Mr. Rush. The Chair----
    Dr. Gingrey. Mr. Chairman.
    Mr. Rush. --recognizes himself now for 5 minutes.
    Dr. Gingrey. Mr. Chairman. Mr. Chairman, could I ask 
unanimous consent to submit my opening statement for the 
record?
    [The prepared statement of Dr. Gingrey 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Rush. Hearing no objections, so ordered.
    The Chair recognizes himself for 5 minutes, and the Chair 
directs this question to Ms. Greisman.
    Ms. Greisman, this legislation provides the FCC with the 
authority over common carriers solely for the purpose of 
enforcing the provisions of the bill. Although the FCC is 
generally prohibited from exercising any authority over common 
carriers, precedence on this kind of carve-out authority as a 
similar problem with giving it to the FCC regarding pay-per-
call services.
    The question that I ask of you is what could the FCC do 
differently if it had this special carve-out authority 
regarding these calling cards?
    Ms. Greisman. Mr. Chairman, the answer is very simple. It 
could sue carriers, which it cannot currently do. The three 
cases brought by the FDC have been against prepaid phone card 
distributors. We do not have the statutory authority currently 
to sue the carriers, many of whom we believe are also 
responsible and should be held liable for the fraudulent claims 
that were made.
    Mr. Rush. In your testimony you argued for a complete 
repeal of the common carrier exemption. Why do you believe that 
this is necessary?
    Ms. Greisman. We think that exemption is outdated. The 
telecommunications industry today looks incredibly different 
from how it looked back in the early 1900s. We see convergence 
among telecommunications and internet service providers, and we 
simply think it does not make sense and it actually impedes our 
law enforcement activities as it has in the prepaid calling 
card context, and it complicates litigation which we have seen 
in cases where we have brought involving cramming, which is the 
unauthorized placement of charges on telephones, telephone 
bills.
    Mr. Rush. Are there any other witnesses who have either 
similar or contrary comments or answers to this question? Are 
there any other witnesses who would like to comment on Ms. 
Greisman's response to the question?
    Ms. Greenberg. Mr. Chairman, we--in our testimony we 
support the carve-out for the specific purposes of allowing the 
FDC to have jurisdiction over the common carriers in this 
situation because they play a big role in servicing the 
consumers who buy these cards. So, yes, we do support the FDC's 
role in this area.
    Mr. Rush. Anyone else? Any other comments?
    I am going to move to another line of questioning here. Mr. 
Kabba, for many immigrants living in the U.S., and you clearly 
stated it, but I want to you to state it again, but it is not 
only immigrants. We got college students and military 
personnel, and the prepaid calling card is a primary method for 
staying in touch with families and friends. But has been stated 
earlier, prepaid calling cards in most instances or in many 
instances fails to deliver the full number of advertised 
minutes.
    For example, in 2007, the Hispanic Institute conducted a 
study and concluded that on average of prepaid calling cards 60 
percent of the minutes that were advertised, and this is 
totally unacceptable. In what remaining time I have a want to 
explore, dig into the impact these fraudulent calling cards can 
have on American consumers. You represent immigrants in 
Chicago. What impact do these fraudulent cards have on the many 
immigrants that you help on a daily basis?
    Mr. Kabba. Clearly if you look at the deceptive practices, 
what we see on a daily basis in our communities is that they 
are generally low-income households, hence you lose more money 
than the service that gets returned, and I think that this is 
important, you know, because these are the households that 
really need to diverse significant portions of their household 
income to basic necessities, you know, food, making sure that 
it can pay the rent and not be homeless, to pay for childcare, 
you know, for their children, or they need actually to have a 
place before they can go to work.
    And so when we look at the complaints that we receive every 
time, Mr. Chairman, it is clear that there is, indeed, an 
outflow of income from these households to businesses that are 
clearly not providing the services that they purport to provide 
for the community.
    And more importantly I think that it sends the message 
that, in our communities at least, that there is no recourse 
for these households to turn to in terms of their legitimate 
complaints, and this, I think, bill helps us to deal with that 
problem, because there is a way for them to call a place. Even 
a toll-free number, you know, that is dedicated to customer 
complaints that we can direct them to. That will be far more 
empowering and help them to know that they are not vulnerable 
to these predators, because that is really what the practice 
is.
    Each card comes in different names, and you attempt to buy 
the cards that perhaps is restricted with your homeland, you 
know, if you are from Trinidad and Tobago, you see a card that 
talks about some Trinidadian music, and you think, oh, that is 
great. Calypso and you buy it, but then it is really the same 
thing as African Kilimanjaro, you know, but it is targeted 
towards these households that are not able to really react to 
the deceptive practices that we have documented.
    And these documentations, in fact, have been highlighted in 
the University of Chicago study of 2004, which clearly supports 
many of the statements that you have made here, that people who 
buy phone cards generally do not get their money's worth. And 
so we are really talking about a community that is 
significantly losing money and not getting the services, and I 
think this bill will help stop that bleeding from their 
households.
    Mr. Rush. The Chairman's time is up.
    The Chair now recognizes the Ranking Member, Mr. 
Radanovich, for 5 minutes.
    Mr. Radanovich. Thank you, Chairman Rush. Welcome to the 
subcommittee, and we appreciate all of your testimony.
    Ms. Greisman, if I may, I would like to quiz you on one 
particular item, and that is the retail end of this concern in 
legislation. During the floor debate last year the gentleman 
from New York, Mr. Engel, the author of the bill, stated very 
clearly that he believes that the intent of the legislation, at 
least last year's legislation, was to address the bad actors 
manufacturing these cards and not go after Mom and Pop 
retailers. And I commend him for his hard work on this 
legislation and efforts to target the source of the problem.
    And, Mr. Chairman, I do have a transcript of a colloquy 
that was done on the floor with--by Mr. Engel and I believe Mr. 
Whitfield, and I would ask unanimous consent to submit that for 
the record.
    Mr. Rush. Hearing no objections, so ordered.
    [The information follows:]*************** INSERT 8 
***************
    Mr. Radanovich. Thank you, Mr. Chairman.
    My question is does the FTC concur with Mr. Engel's policy 
intent on this legislation to exempt retailers?
    Ms. Greisman. Speaking on my own behalf, which is all I can 
do at the moment, yes, that is consistent with my understanding 
of the bill.
    Mr. Radanovich. All right, and so you do agree that Mom and 
Pop stores who have done nothing wrong but rather than--they 
shouldn't be on the hook for the bad actors?
    Ms. Greisman. They have not been a target of the FTC 
enforcement, and I would not anticipate looking toward them in 
any foreseeable future.
    Mr. Radanovich. OK. The FTC staff provided technical 
comments in a redline version of H.R. 3402 in the previous 
Congress. The Commission's comments did not delete the original 
language that carved out retail merchants, only engaged in 
point-of-sale transaction with consumers but rather only made a 
technical change to it. The language was removed as it moved to 
the House Floor for consideration.
    Does the Commission believe that there is any harm if that 
limitation is placed back in the legislation?
    Ms. Greisman. I would have to look at the precise language. 
I don't remember it specifically.
    Mr. Radanovich. If it were as simple as just, you know, 
making sure that retailers were not Mom and Pop stores and such 
were not held liable under this legislation.
    Ms. Greisman. Our concern in that context I believe would 
be that a carve-out is not needed and it is not necessary and 
as a general matter we disagree with carve-outs to bills.
    Mr. Radanovich. So you didn't--did the FTC support the 
deletion of the exemption?
    Ms. Greisman. I honestly don't remember. I will have to 
check.
    Mr. Radanovich. If you could get back to me on that, that 
would be great. Thank you.
    What is the current civil penalty for violation of Section 
18 of the FTC Act?
    Ms. Greisman. Sixteen thousand dollars per violation.
    Mr. Radanovich. Uh-huh. Does that mean that without some 
sort of legislative limitation such as a definitional exemption 
or injunctive relief for not knowing violations, that Mom and 
Pop stores or bodega stores could be liable for up to $16,000 
if it unwittingly sells a $5 prepaid card that omits particular 
disclosures?
    Ms. Greisman. Under the Federal Trade Commission Act there 
is a knowledge standard that FTC would have to satisfy in order 
to impose a civil penalty on any entity.
    Mr. Radanovich. Uh-huh. Would the FTC support amending the 
bill to include a retainer exemption? I am sorry. You addressed 
that before, but are you speaking as a commissioner or as the 
Commission or----
    Ms. Greisman. I am speaking solely on my own behalf, and on 
my own behalf I do not believe we would support that.
    Mr. Radanovich. Because you feel that that exemption is not 
necessary.
    Ms. Greisman. Correct.
    Mr. Radanovich. Alternatively would the FTC support 
limiting relief against those--these point-of-sale retailers in 
case of not knowing, non-knowing violations to injunctions 
similar to the limitations for State actions in the bill?
    Ms. Greisman. I am sorry. I am not sure I follow your 
question, sir.
    Mr. Radanovich. Would the FTC support limiting relief 
against these point-of-sale retailers in cases of non-knowing 
violations to injunctions similar to the limitation of State 
actions in the bill?
    Ms. Greisman. I think for the same reasons I just stated 
that as a general manner--matter we disfavor any particular 
exemptions. We probably would not support that.
    Mr. Radanovich. All right. Thank you very much, and Mr. 
Chairman, I yield back.
    Mr. Rush. The Chair thanks the gentleman.
    The Chair now recognizes the Ranking Member, Ms. 
Schakowsky, for 5 minutes for questions.
    Ms. Schakowsky. Thank you, Mr. Chairman. I want to give a 
special welcome to Mr. Kabba. I like to welcome people from our 
hometown but also to say that I have worked very closely with 
the Illinois Coalition for Immigrant and Refuge Rights, and I 
appreciate your work. And, again, as I said in my opening 
statement, it has particular residence in my district, which is 
so immigrant rich, and people coming from all over the world.
    Let--who was it that talked about technologies not being 
too specific? Was that you, Ms. Greenberg? Oh, you did. My 
understanding is that--and I don't know if they exist right 
now, but actual telephones, cheap telephones that--instead of 
cards that could be sold. In other words, you know, instead of 
a card or other technologies where this--it would have exactly 
the same affect, but this legislation wouldn't cover it because 
it is not a card.
    Is that what you were concerned about?
    Ms. Acampora. It was being not so specific because 
technology keeps changing, so actually we recommended the 
language that was in the Senate bill.
    Ms. Schakowsky. Which----
    Ms. Acampora. Which doesn't go into some of these 
technologies, because technology keeps changing.
    Ms. Schakowsky. Are you referring to a card versus 
something else? Is that what you are saying?
    Ms. Acampora. It could be. Yes. It could be that there will 
be changes so it won't be a card and so that if the bill is 
just specific, you are leaving loopholes open to these people 
who are very inventive and who are the bad actors. They will 
find a loophole in the law, and they will look to do something 
else.
    Ms. Schakowsky. Ms. Greisman, would you comment on that as 
well?
    Ms. Greisman. We would have to take a look at the specific 
language of the bill. I can't address whether there are any 
loopholes at the moment. It is certainly something we will look 
into.
    Ms. Schakowsky. Well, at the moment but I am wondering if 
you could--if you have any advice on drafting legislation that 
would have some staying power.
    Ms. Greisman. Yes. We specifically do oppose the exemption 
for wireless prepaid providers.
    Ms. Schakowsky. OK. Let me see. When you said that there 
are no remedies, Mr. Kabba, do you see any--is that a matter of 
consumer education in your view or the fact that there really 
aren't any remedies right now, that people are left at the 
mercy of the calling cards companies?
    Mr. Kabba. I think it is really the fact that currently 
there are no remedies all across diverse communities we see 
this, you know, the fact that we do not even have one 
standardized place for people to turn to, even if it is a toll-
free number that we can say this complaint can be lodged there. 
That I think would be helpful.
    The consumer education is not as difficult as I would 
imagine if we have a clear language; simple, clear language 
from the providers. The fact that they are using extra-fine 
print in language that we do not even, as advocates, 
understand, less, you know--so when you are talking about 
limited-English proficient households, you know, that, in 
effect, makes it harder. But I do know that right now the fact 
that there is no way to lodge complaints, you know, and when 
you are dealing with cards that keep on changing their plan 
names, the target households, making sure that, yes, people who 
are from Asia can feel like, oh, this card is special because 
it has something that reminds them of their home. You know, or 
in the case of Africa, come up with a card and when, in fact, 
it is really the same provider if you read the fine print.
    We need to make sure that we really have a place to lodge 
complaints.
    Ms. Schakowsky. OK. Does the State of New York have any 
remedies, and I am assuming because you are here, your view is 
that national legislation certainly would be preferable.
    Ms. Acampora. We do have a law, and, of course, our law as 
compared to what a new national standard would be would be 
less, but we do like the flexibility issue for States because, 
as I said in my statement, the State cops, when something 
happens, people are coming to the local officials, and so that 
the flexibility that allows us to address a problem right away 
is crucial, but the uniformity is still a good thing to have. 
We still could use more teeth in legislation. Yes.
    Ms. Schakowsky. OK. Ms. Greenberg.
    Ms. Greenberg. I think Mr. Kabba mentioned an interesting 
idea. One thing we might think about is having a statement on 
the card, if you have issues or concerns about use of this 
card, call this toll-free number, and it could be a place that 
would log complaints and see which providers are raising the 
biggest or creating the biggest problems. I think, you know, we 
would begin to have a database of where the rip-offs were 
happening.
    And one other thing----
    Ms. Schakowsky. And would the FTC be the right place for 
that?
    Ms. Greenberg. We will see if Ms. Greisman agrees to that, 
and she probably won't on the spot, but, yes, I would think it 
would have to be a, you know, a Federal clearinghouse for this 
kind of information.
    One other thing I want to say is that I lived abroad for a 
year. I lived in Australia, and when you buy a calling card 
there, and it says you are going to get 500 minutes, you get--
you always get those minutes. So this is not rocket science. It 
can be done. They just have tougher regulations, and here I use 
cards here all the time and routinely they, you know, use them 
once, they are--the value dissipates almost immediately.
    So I know this can be done, and I am sorry to use up your 
time.
    Ms. Schakowsky. Yes. No. My time--although, Mr. Chairman, 
I--if we could later, I do have one or----
    Mr. Rush. The Chair wants to inform the Vice Chair that we 
will have a second round for 2 minutes each for each member to 
ask a second round of questions.
    The Chair now recognizes the gentleman from Pennsylvania, 
Mr. Pitts, for 2 minutes. Five minutes.
    Mr. Pitts. Thank you, Mr. Chairman.
    Ms. Greisman, the FTC works with the FCC and State AGs and 
other State and local agencies to combat unfair and deceptive 
calling card practices. How do all these agencies divide up 
enforced responsibilities? And with all these entities involved 
in enforcement do you end up with duplicative efforts?
    Ms. Greisman. No, sir, we do not. Dual Federal and State 
enforcement really is more the norm than the exception, and we 
see that most particularly in the telemarketing area where this 
type of dual enforcement scheme has been enormously effective 
and productive, and in fact, working through task forces such 
as the Prepaid Phone Card Task Force that we created back in 
2007. We do allocate resources and share information and work 
in a very cooperative manner.
    Mr. Pitts. Do inconsistent State laws place service 
providers in an untenable situation by prohibiting activities 
in one State that are permitted in another? Are prepaid calling 
card services usually tailored on a State-by-State basis, or 
are they generally uniform throughout the United States?
    Ms. Greisman. What I can say is that there are 11 States 
currently that have specific statutes or regulations addressing 
the prepaid phone card industry, and I am not aware of problems 
that those different laws have presented or posed.
    Mr. Pitts. Would it be easier or more efficient to 
coordinate with the States on enforcement actions if there were 
a single standard? If there is a single standard, isn't it 
easier to catch fraudulent actors?
    Ms. Greisman. I don't believe that is necessarily the case. 
I think what we have now are different standards among the 
various States and at the Federal level, and for example, in 
the telemarketing area. That has not been a problem at all.
    Mr. Pitts. Now, Mr. Ramminger offers two proposed solutions 
to the concern of distributor and retail merchant liability, 
and his proposals involve either a change to the definition or 
a change to require the FTC to address it through its required 
rulemaking.
    What do you think of those proposals?
    Ms. Greisman. Well, I would like to take this opportunity 
to correct a misstatement I made in response to Mr. 
Radanovich's question. Actually, as I understand it, 
distributors, the way distributors currently is defined in the 
bill is a way that would exclude pure retailers, which I think 
is an issue that was raised earlier. I would have to look at 
the type of proposal that Mr. Ramminger is proposing with 
respect to distributors, but as a general matter, as I said 
before, my position is that we would not favor excluding any 
particular entity.
    And the three cases the FTC has brought have, in fact, been 
against distributors.
    Mr. Pitts. Ms. Greenberg, at what point do too many 
disclosures overwhelm consumers to the point where they 
disregard them or never read them?
    Ms. Greenberg. Yes, sir. That certainly is a concern, and 
that is why we recommended something much more uniform, some 
sort of uniform text on every card because, you know, with the 
fine print as we can see there with this very good example, you 
know, at some point it is too small to read, and people don't 
really know what to do with the information.
    So if we could have some uniformity on these cards, I think 
that would be a great benefit to consumers.
    Mr. Pitts. And as Mr. Kabba said, it should be in simple, 
plain English.
    Ms. Greenberg. That is correct.
    Mr. Pitts. Yes. Should calling card companies not be 
allowed to set their own rates and fees as long as they 
disclose them completely?
    Ms. Greenberg. That is a question for me? Yes.
    We--this is why we call this the wild west because right 
now they can, these companies could set whatever fees they 
wish. They can promise--the rules can change at any moment. So 
we are really calling for much more oversight on--both on the 
part of the FTC and this bill to try to curb some of the worst 
practices.
    Mr. Pitts. Mr. Kabba, do you know if the FCC has received 
complaints about the prepaid wireless market, and if so, do you 
know what the FCC has done to resolve those complaints?
    Mr. Kabba. Not to the best of my knowledge but I do know 
that it is a concern to us, you know, and I hope that there 
will be some standardized way for us to really lodge those 
complaints.
    Mr. Pitts. We don't have much time, but what percentage of 
the market would you say, Mr. Kabba, are bad actors?
    Mr. Kabba. At this point I can really say that the vast 
majority, you know, and that is why this problem needs to be 
addressed, and I really commend the subcommittee for focusing 
on it. It is very hard to really pick out the good actors, you 
know. Last month alone I used probably four different cards, 
and I can show you that all the cards did not deliver the 
number of minutes. So it is not a case where you have a good 
apple in the bag of bad apples. It is really the bag that you 
need to look at, the whole bag.
    Mr. Pitts. My time has expired. Thank you, Mr. Chairman.
    Mr. Rush. The Chair now recognizes Dr. Gingrey for--no. Mr. 
Stearns. I am sorry. Mr. Stearns for 5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman.
    Ms. Greisman, under the law the jurisdiction of the FCC and 
the FTC would share jurisdiction, but I don't think they 
necessarily overlap if I understand. If the jurisdiction in 
this area was to overlap, for instance, by removing the common 
carrier exemption so that the FTC can bring actions against 
FCC-regulated entities, the question would be could common 
carriers find themselves at risk of being compliant with one 
agency's rules but subject to a different enforcement regime by 
a different agency, enforcing the same rule?
    Ms. Greisman. I don't believe so, sir. I think the rules of 
the road would be remarkably consistent, and that is what we 
have seen in the telemarketing area where both the FTC and the 
FCC enforce very similar rules involving the telemarketing 
industry, and I don't believe we have seen any consistent or 
any inconsistent or duplicative efforts. For example, I think 
do not call is a prime example of that.
    Mr. Stearns. Would the FTC support the inclusion of 
language that is similar to that in the Senate bill that 
essentially limits the FCC enforcement in this area where the 
FTC enforcement authority exists?
    Ms. Greisman. I don't recall that specifically in the 
Senate bill, but I--the FTC's----
    Mr. Stearns. My staff says it is in there so----
    Ms. Greisman. OK. I certainly would take your word for 
that. I just can't recall it myself.
    Mr. Stearns. Yes. Let us just go under that assumption. I 
think people in the audience are nodding, so let us just assume 
that and then just see if you can answer the question with that 
premise in mind.
    Ms. Greisman. If I understand your question, the FTC's view 
is that the common carrier exemption is outdated, and lifting 
it will not create inconsistent or duplicative enforcement 
efforts by the FTC and the FCC.
    Mr. Stearns. Uh-huh. I think this is probably a reiteration 
of what you have already answered, but you have testified it is 
never a good idea to limit--this is for Acampora. You said that 
it is never a good idea to limit State consumer protection.
    However, without preemption is it, isn't it farfetched to 
see that if disclosure is required by the Federal Government 
and even one-third of the States, let alone all 50, that the 
legally-required disclosure can end up looking something much 
like that poster over there? And I think it was suggested 
earlier that people obviously are not going to read it if it 
looks similar to that poster over there.
    You suggest requiring disclosure on cardstock, and I guess 
the question is would the cardstock distribute with cards? Will 
the cardstock distributed with cards have to be as big as that 
poster to fit all those disclosures? I mean, that is what we 
are thinking about.
    Ms. Acampora. Well, the cardstock would be the same size as 
the calling card, and it would simply have on there the warning 
to consumers not to throw that card out, and it would have 
information for them, which sometimes is on that packaging 
getting thrown out, and then they can't see it.
    So we thought we would kick this around at the NARUC 
committees from commissioners from all the States, and this is 
something that was brought up that everyone agreed with could 
be helpful.
    Mr. Stearns. You have closed on a House before, and did you 
read all the fine print on the mortgage statement of the--you 
know how complicated it is? Sometimes it is 30 pages.
    Ms. Acampora. I didn't, but my husband did.
    Mr. Stearns. Oh, you have a lawyer do it?
    Ms. Acampora. No, he is not a lawyer, but he is a very 
precise man.
    Mr. Stearns. But most people have a lawyer. I mean, at the 
rate we are going if you have that card, you are going to need 
a lawyer once you buy the card to get this whole thing. You are 
going to need a lawyer to see what it is. I mean, obviously, 
wouldn't you think you would want to make it simplified?
    Ms. Acampora. I think this is simplified.
    Mr. Stearns. With 50 States having separate, different 
connotations on the card?
    Ms. Acampora. Well, you have to give the States 
flexibility. I mean, we like the idea of the Federal Government 
having a standard but----
    Mr. Stearns. And remember, we passed this bill without this 
by unanimous agreement in this--so both--bipartisan bill, the 
Engel bill passed, everybody supported it without what you are 
requesting, so I think----
    Ms. Acampora. Well, you are jumping from card to now to the 
various----
    Mr. Stearns. OK.
    Ms. Acampora. --degrees. So let us just look at the 
flexibility that States need, but also I believe in the bill 
the language, the Federal law would prevail is there was a 
problem.
    Mr. Stearns. All right. As I understand it each State would 
have the flexibility to do what they want, and the Federal 
law----
    Ms. Acampora. They do but if there was a case where it was 
brought to--where the Federal Government would be involved, the 
Federal law would prevail.
    Mr. Stearns. OK. My time has--but you would agree that 
something that complex on a small card would be very difficult 
to convey to----
    Ms. Acampora. That wouldn't be on the small card. The 
information that consumers would need to make a phone call or 
to go on a Web site, that is the information that would be on 
that card, not that.
    Mr. Stearns. You don't think this would create a lot of 
litigations?
    Mr. Rush. And the gentleman's time is up. We have--there is 
a vote occurring on the floor, and we want to try to finish up 
the questioning before we would have to recess for the vote.
    The--Mr. Scalise, the gentleman from Louisiana. I am sorry. 
Dr. Gingrey is recognized for 5 minutes.
    Dr. Gingrey. Mr. Chairman, thank you. Sometimes myself and 
Mr. Scalise get confused. He likes to walk around saying he is 
Dr. Scalise, but we know better. Mr. Chairman, thank you.
    I want to address my question, the first question to Mr. 
Ramminger. In your testimony you discussed the need to hold the 
prepaid calling industry accountable for the current abuse of 
the system, abuses of the system. However, you also discussed 
the need for your industry to be held accountable, only if they 
know about the incorrect information on the calling cards that 
are being distributed.
    Under the bill previously considered by the subcommittee 
that ultimately passed the House, there was an exemption for 
point-of-sale retailers if they sold these cards. Under the 
current version of this bill that exemption for retailers no 
longer exists.
    So my question is this. How does this potentially affect 
your industry, and if you can speculate the point-of-sale 
retailers for whom you, I guess you work.
    Mr. Ramminger. Yes. We supply. I mean, what we are 
basically asking for is that the protection that was in the 
original legislation last time around that protected the 
retailers be extended to our distributor members, and I, again, 
want to make the distinction between our distributors who are 
buying candy and gum and snacks and phone cards and selling it 
to the retailers and the ``distributors,'' that are sometimes 
called distributors, they are buying minutes from a long 
distance company and making cards. That is a different kind of 
distributor.
    So, yes, sir. What could happen is if through no fault of 
his own one of my members buys these cards from what is 
essentially a manufacturer of the cards and sells them to a 
retailer, believing what the manufacturer of the card has said, 
that there are 10,000 minutes or however many minutes it says 
there are, the person who should be--the entity that should be 
held accountable if there are not that many minutes is the 
entity that created the card we believe, not the distributor or 
the retailer. And we don't believe it would be appropriate for 
our distributors to be fined $16,000 every time they sell a 
phone card that----
    Dr. Gingrey. Mr. Ramminger, thank you. I understand your 
response.
    And let me go back then to Ms. Greisman, because I got a 
little confused. You, just a moment ago you asked to correct 
something that you had said. Do you disagree with Mr. 
Ramminger, or do you now agree with him that point-of-sale 
folks are different than those who are the so-called 
distributors who buy the minutes, who put them on the card and 
the bad actors that can monkey around with what is really--is 
there any disagreement with what he just said and your opinion?
    Ms. Greisman. My interpretation of the bill is that virtue 
of the way distributors is a defined term there, that retailers 
are not covered. So retailers are out of this particular bill. 
I would not support taking distributors out, and I would cite 
to the fact that the three cases the FTC has brought have 
involved retailers. Excuse me. Have involved distributors.
    Dr. Gingrey. So you wouldn't be in favor of taking the 
point-of-sale folks out of----
    Ms. Greisman. Point-of-sale people to the extent they are 
the ones I would characterize as retailers already are out of 
the bill as drafted.
    Dr. Gingrey. Let me ask you, Ms. Greisman, another 
question. Do inconsistent State laws place service providers in 
an untenable situation by prohibiting activities in one State 
that are permitted in another? Are prepaid calling card 
services usually tailored on a State-by-State basis, or are 
they generally uniform throughout the United States?
    Ms. Greisman. Sir, my understanding is that 11 States have 
discreet statutes or regulations that do, in fact, tailor the 
treatment of prepaid phone card industry currently. I am not 
aware that that has led to conflicting results or problems in 
an industry that by all calculations appears to be thriving.
    Dr. Gingrey. Yes, but wouldn't it be easy and more 
efficient to coordinate with the States on enforcement actions 
if there was a single standard?
    Ms. Greisman. It might be, but I don't believe having 
different standards has created any problems to date or 
necessarily would going forward.
    Mr. Rush. Dr. Gingrey, it seems like your time is complete.
    Dr. Gingrey. Mr. Chairman, thank you. I didn't realize I 
had----
    Mr. Rush. I didn't either.
    Dr. Gingrey. I yield back. Thank you.
    Mr. Rush. Thank you so much.
    Now, Dr. Scalise.
    Mr. Scalise. I only play when we are talking about the 
healthcare debate, I guess. Thank you, Mr. Chairman. I know we 
have votes. I will try to run through this real quick.
    First, Ms. Greisman, on--earlier I think in your testimony 
you talked about some of the bad actors, the worst actors in 
the prepaid industry and now moving over to the wireless 
market.
    First, do you have a list of those worst actors, and have 
you all been taking any action against them as they have been 
doing things both in dual industries, both prepaid and 
wireless?
    Ms. Greisman. Sir, we don't have jurisdiction over them. We 
are talking about carriers that would migrate into the wireless 
space. We currently have no jurisdiction over common carriers. 
But what I can say is that we have seen the advertising and 
marketing for the wireless prepaid phone card services looks 
significantly similar to--in the non-wireless space, and in 
particular we do see that they are targeting immigrant 
populations.
    Mr. Scalise. Have you taken action against them on the 
prepaid side?
    Ms. Greisman. We do not have--our prepaid phone court cases 
have involved only distributors.
    Mr. Scalise. And if I could go back on, Mr. Ramminger, I 
know it seems like there is a little, I don't know if it is a 
rift or the definitions, and obviously there is a dispute 
between a distributor, is the definition of distributor first 
in a way that you feel is fair, but also when the statement 
that retailers are out of the bill, is that--are you all 
comfortable with that, too? Do you feel that the people that 
really don't have any part in--if there is fraud going on, they 
have no part in it, but are they really being pulled into it?
    Mr. Ramminger. Yes. I mean, I think it is fair to say that 
we certainly support taking the retailers, the liability away 
from the retailers. What we are saying is we also believe that 
our distributor members, similar to the retailers, are buying 
from effectively a manufacturer. Occasionally the people who 
make these cards, because they are buying minutes, they are not 
selling widgets. They are buying minutes and putting them on a 
card, those guys are referred to as distributors, too. That is 
why I think the confusion is coming in. Our guys are not buying 
minutes and putting them on a card. They are simply buying the 
cards and selling them to the retailer, who is selling them to 
the consumer, and we don't think we should have to be liable 
unless, you know, it can be shown that somehow----
    Mr. Scalise. Think you are doing something deliberate or 
there is harm intended. I appreciate it. I know we have got to 
go, so I yield back.
    Mr. Rush. The Chair thanks the gentleman.
    The Chair thanks all the witnesses for the gracious use of 
your time. You have sacrificed a portion of your busy day to 
us, and we really appreciate your testimony. It has been very 
enlightening for us all, and you certainly have illuminated a 
path for us as we proceed with this matter.
    I would just ask that you be available to us for members to 
submit their questions to you in writing and then if you would 
respond within 2 weeks to those questions, we would be 
delighted.
    And, again, we thank you so much for your time. We do have 
a vote, so we will rush over to the floor in order to cast four 
votes. Thank you very much for your presence, and the 
subcommittee is now adjourned.
    [Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                                 
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