[Congressional Record Volume 144, Number 24 (Tuesday, March 10, 1998)]
[Senate]
[Pages S1700-S1702]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself and Mr. Durbin):
  S. 1740. A bill to amend the Communications Act of 1934 to improve 
the

[[Page S1701]]

protections against the unauthorized change of subscribers from one 
telecommunications carrier to another, and other purposes; to the 
Committee on Commerce, Science, and Transportation.


             the telephone slamming prevention act of 1998

  Ms. COLLINS. Mr. President, today I am introducing a bill to curtail 
a fraudulent practice known as slamming--the unauthorized change of a 
customer's telephone service provider. Telephone slamming is a 
widespread and growing problem. In Maine, for example, slamming 
complaints to the local telephone company increased by 100% from 1996 
to 1997. Nationwide, slamming is also the number one telephone-related 
complaint to the FCC. While the FCC received a total of more than 
20,000 slamming complaints in 1997, a significant increase over the 
previous year, estimates from phone companies indicated that as many as 
one million people were slammed last year.
  Last fall, the Permanent Subcommittee on Investigations, which I 
chair, undertook an extensive investigation of the slamming problem. On 
February 18th, I chaired a field hearing on slamming in Portland, 
Maine. My distinguished colleague, Senator Richard Durbin, joined me at 
the hearing, and we heard first-hand from several consumers about the 
problems they experienced with telephone slamming.
  At the Subcommittee hearing, Maine slamming victims explained how 
some long-distance companies used fraudulent or deceptive practices to 
change their telephone service. Witnesses used words such as 
``stealing,'' and ``criminal,'' and ``break-in'' to describe practices 
employed by unscrupulous telephone companies to switch unsuspecting 
customers and boost profits.
  One witness, Pamela Corrigan from West Farmington, Maine, testified 
that she was sent an unsolicited ``welcome package'' in the mail, which 
looked like the stacks of junk mail that we receive every day. However, 
this ``junk mail'' was not what it appeared to be. This ``welcome 
package'' automatically signed her up for a new long distance service 
unless she returned a card rejecting the change. She was amazed and 
appalled that it was possible for a company to change her long distance 
service simply because she did not respond that she did not want their 
service.
  Another witness, Susan Deblois from Winthrop, Maine, testified that 
when she was slammed, her children were unable to use the 800 number 
she had for them to call home in case of an emergency.
  Slamming not only affects families but also small businesses and 
communities. For example, Steve Klein, the owner of Mermaid 
Transportation Company in Portland, Maine, testified that his business 
phone lines, which are critical to his livelihood, were tied up for 
four days which he was slammed by a long-distance telephone reseller 
which falsely represented itself as AT&T.
  Similarly, Ms. Corrigan, who is the town manager of Farmington, 
Maine, reported that the town's phone lines were also slammed. Simply 
put, Mr. President, no one is immune from this illegal activity.
  Victims of slamming are frustrated. They are angry. They should not 
have to spend their time and energy resolving problems that are not of 
their own making. People rely on their home and business telephone 
service, and they should be able to choose their own long-distance 
company without fear that their decision will be changed without their 
consent.
  Deliberate slamming is like stealing and should not be tolerated. The 
FCC must step up enforcement efforts to make sure that existing laws 
and regulations are followed by telephone companies, and Congress must 
act to strengthen penalties to halt this pernicious practice.
  The comprehensive legislation that I am introducing today, along with 
my colleague Senator Durbin, will attack the problem of slamming from 
all sides.
  First, the bill gets tough with those who engage in deliberate 
slamming. It would increase civil penalties and establish new criminal 
penalties for intentional slamming. Specifically, civil penalties would 
be increased to a minimum of $50,000 for the first slamming offense and 
$100,000 for a subsequent offense.
  Criminal penalties would be established for intentional slamming, the 
same as those for any other federal crime: a maximum of $100,000 and 
one year imprisonment for a misdemeanor and $250,000 and five years 
imprisonment for a felony. In addition, anyone convicted of intentional 
slamming will be disqualified from being a telecommunications service 
provider. The bill would also allow the states to bring action in 
federal court against slammers on behalf of its residents, a provision 
suggested by Senator Durbin.
  Second, our legislation increases consumer protection. It would give 
control back to consumers by taking the financial incentive away from 
companies that engage in slamming. Rather than paying the slamming 
company, consumers could pay their original carrier at their previous 
rate. It would further protect consumers by eliminating the so-called 
``welcome package'' method of verification, a favorite tool of 
slammers, which is misused and deceptive.
  Third, the bill strongly encourages the FCC to step up its 
enforcement efforts against slamming. It would require local telephone 
companies to report a summary of slamming complaints to the FCC for 
further investigation, and it would require the FCC to report to 
Congress on its enforcement actions against slammers.
  Finally, the legislation would require the FCC to report to Congress 
on whether or not its current procedures contain sufficient safeguards 
to prevent unscrupulous telecommunications providers from receiving an 
FCC license in the first place.
  Mr. President, consumers have lost control over their 
telecommunications service to unscrupulous providers. The Collins-
Durbin legislation would go a long way toward halting slamming. I urge 
my colleagues to join me in the fight against slamming by co-sponsoring 
the ``Telephone Slamming Prevention Act of 1998.''
  For the information of all my colleagues, I ask unanimous consent to 
include in the Record a detailed summary of the provisions contained in 
this comprehensive anti-slamming bill.
  There being no objection, the summary was ordered to be printed in 
the Record, as follows:

          Summary of Telephone Slamming Prevention Act of 1998

       (1) Clarification of Verification Procedures: The bill 
     amends current law, which allows the FCC to determine the 
     verification procedures that telecommunications carriers can 
     use when executing a change in subscriber service, to place 
     some restrictions on the approved verification methods. 
     Specifically, this provision will eliminate the ``welcome 
     package'' method of verification. It will still allow the FCC 
     to determine the appropriate forms of verification and the 
     time and manner in which such verification must be retained 
     by carriers.
       (2) Liability for Charges: The bill also allows subscribers 
     who have been slammed, and who have not yet paid their 
     telephone bill to the unauthorized carrier, to pay their 
     original carrier for their phone usage, at the rate they 
     would have been charged by their original carrier. The 
     provision will not change existing law and FCC regulations 
     that make the slamming carrier liable to the original carrier 
     for any charges it collects from a slammed subscriber. This 
     provision is designed to take away the financial incentive 
     for slamming.
       (3) Additional Penalties: The bill also increases the civil 
     penalties for slamming and creates criminal penalties.
       The civil penalties provision will require the FCC to 
     assess a minimum of $50,000 for the first slamming offense, 
     and $100,000 for any subsequent offense, unless the 
     Commission determines that there are mitigating 
     circumstances. Currently, the penalty typically assessed by 
     the FCC is only $40,000 for each offense.
       In addition, this provision will allow the Commission, at 
     its discretion, to assess civil penalties against carriers 
     that make unauthorized carrier changes on behalf of their 
     agents or resellers. It will require the Commission to 
     promulgate regulations on the oversight responsibilities of 
     the underlying facilities-based carriers for their agents or 
     resellers. This will make it clear to carriers, who sell 
     access to their telephone lines, that they have some 
     responsibility for the actions of their agents or resellers.
       Currently, slamming is not a crime. The criminal penalties 
     provision will make intentional slamming a misdemeanor for 
     the first offense (not more than one year imprisonment), and 
     a felony for subsequent intentional slamming offenses (not 
     more than five years imprisonment). Criminal fines for 
     intentional slamming are the same as those for any other 
     federal crime: a maximum of

[[Page S1702]]

     $100,000 for a misdemeanor and $250,000 for a felony. In 
     addition, anyone convicted of the crime of intentional 
     slamming will not be allowed to be a telecommunications 
     service provider, and any company substantially controlled by 
     a person convicted of intentional slamming will also be 
     disqualified from providing such services. After five years, 
     however, the FCC shall have the option to reinstate such 
     individuals or companies disqualified under this provision, 
     if it is in the public interest to do so.
       (4) State Actions: The bill gives the states the right to 
     take action against slammers on behalf of its residents, and 
     makes it clear that nothing in this section preempts the 
     states from taking action against intra-state slammers. This 
     provision is necessary because some state supreme courts have 
     ruled that FCC regulatory authority preempts the states from 
     acting in this area.
       (5) Reports on Slamming Complaints: The bill requires all 
     telecommunications carriers, including local exchange 
     carriers, to report on the number of subscriber slamming 
     complaints against each carrier. The provision allows the FCC 
     to determine how often these reports would have to be 
     submitted. This provision would not require carriers to refer 
     complaints on an individual basis, only a summary report that 
     could be used by the FCC to determine which companies are 
     engaging in patterns and practices of slamming.
       (6) FCC Report on Slamming and Enforcement Actions: The 
     bill establishes a requirement that FCC submit a report to 
     Congress on its slamming enforcement actions. The FCC already 
     provides this information in its Common Carrier Scorecard, so 
     this provision does not establish a new report. It is 
     designed to make it clear to the FCC that Congress considers 
     slamming enforcement important.
       (7) FCC Report on Adequacy of FCC License Process: This 
     bill requires the FCC report to Congress on whether current 
     licensing requirements and procedures are sufficient to 
     prevent fraudulent telecommunications providers from 
     receiving an FCC license. Currently, the FCC does not review 
     telecommunications provider applications prior to issuing FCC 
     licenses, allowing fraudulent companies into the 
     telecommunications marketplace.

                          ____________________