[Congressional Record Volume 145, Number 114 (Thursday, August 5, 1999)]
[Senate]
[Pages S10428-S10431]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED:
  S. 1527. A bill to amend section 258 of the Communications Act of 
1934 to enhance the protections against unauthorized changes in 
subscriber selections of telephones service providers, and for other 
purposes; to the Committee on Commerce, Science, and Transportation.


                     THE ANTI-SLAMMING ACT OF 1999

  Mr. REED. Mr. President, I rise today to make a few comments 
concerning legislation which I am introducing to deal with the problem 
of slamming.
  Telephone ``slamming'' is the illegal practice of switching a 
consumer's long distance service without the individual's consent. This 
problem has increased dramatically over the last several years, as 
competition between long distance carriers has risen, and slamming is 
the top consumer complaint lodged at the Federal Communications 
Commission (FCC), with 11,278 reported complaints in 1995, and 16,500 
in 1996. In both 1997 and 1998, more than 20,000 complaints were filed. 
It is very clear that this problem is on the rise, and unfortunately, 
this represents only the tip of the iceberg because most consumers 
never report violations to the FCC. One regional Bell company estimates 
that 1 in every 20 switches is fraudulent. Media reports indicate that 
as many as 1 million illegal transfers occur annually. Thus, slamming 
threatens to rob consumers of the benefit of a competitive market, 
which is now composed of over 500 companies which generate $72.5 
billion in revenues. As a result of slamming, consumers face not only 
higher phone bills, but also the significant expenditure of time and 
energy in attempting to identify and reverse the fraud. The results of 
slamming are clear: higher phone bills and immense consumer 
frustration.
  Mr. President, we are all aware of the stiff competition which occurs 
for customers in the long distance telephone

[[Page S10429]]

service industry. The goal of deregulating the telecommunications 
industry was to allow consumers to easily avail themselves of lower 
prices and better service. Hopefully, this option will soon be 
presented to consumers for in-state calls and local phone service. 
Indeed, better service at lower cost is a main objective of those who 
seek to deregulate the utility industry. Unfortunately, fraud threatens 
to rob many consumers of the benefits of a competitive industry.
  Telemarketing is one of the least expensive and most effective forms 
of marketing, and it has exponentially expanded in recent years. By 
statute, the Federal Trade Commission (FTC) regulates most 
telemarketing, prohibiting deceptive or abusive sales calls, requiring 
that homes not be called at certain times, and that companies honor a 
consumer's request not to be called again. The law mandates that 
records concerning sales be maintained for two years. While the FTC is 
charged with primary enforcement, the law allows consumers, or state 
Attorneys General on their behalf, to bring legal action against 
violators. Yet, phone companies are exempt from these regulations, 
since they are subject to FCC regulation.
  While the FCC has brought action against twenty-two of the industry's 
largest and smallest firms for slamming violations with penalties 
totaling over $1.8 million, this represents a minute fraction of the 
violations. FCC prosecution does not effectively address or deter this 
serious fraud. State officials have become more aggressive in pursuing 
violators. The California Public Utility Commission fined a company $2 
million in 1997 after 56,000 complaints were filed against it. Arizona, 
Arkansas, Idaho, Illinois, Kansas, Minnesota, Mississippi, Missouri, 
New Jersey, Ohio, Vermont, and Wisconsin have all pursued litigation 
against slammers. Public officials of twenty-five states asked the FCC 
to adopt tougher rules against slammers.
  As directed by the Telecommunications Act of 1996, the FCC has moved 
to close several loopholes which have allowed slamming to continue 
unabated. Most important, the FCC has proposed to eliminate the 
financial incentive which encourages many companies to slam by 
mandating that customers who are slammed do not have to pay fees to 
slammers for the first thirty days after the switch occurred. At 
present, a slammer can retain the profits generated from an illegal 
switch. Additionally, the FCC has proposed regulations which would 
require that a carrier confirm all switches generated by telemarketing 
through either (1) a letter of agency, known as a LOA, from the 
consumer; (2) a recording of the consumer verifying his or her choice 
on a toll-free line provided by the carrier; or (3) a record of 
verification by an appropriately qualified and independent third party. 
The regulations, which were recently finalized by the FCC, 
unfortunately have been blocked by court order until long distance 
carriers have time to analyze the implications of the rules. If and 
when these rules are finalized, I still believe that these remedies 
will be wholly inadequate to address the ever-increasing problem of 
slamming. The problem is that slammed consumers would still be left 
without conclusive proof that their consent was properly obtained and 
verified.
  My legislation encompasses a three-part approach to stop slamming by 
strengthening the procedures used to verify consent obtained by 
marketers; increasing enforcement procedures by allowing citizens or 
their representatives to pursue slammers in court with the evidence 
necessary to win; and encouraging all stakeholders to use emerging 
technology to prevent fraud.
  Mr. President, let me also thank the National Association of 
Attorneys General, the National Association of Regulatory Utility 
Commissioners which through both their national offices and individual 
members provided extensive recommendations to improve this bill. 
Additionally, I have found extremely helpful the input of several 
groups which advocate on behalf of consumers. I was particularly 
pleased to work with the Consumer Federation of America to address 
concerns which its members expressed.
  Mr. President, let me take a few minutes to outline the specific 
provisions of my bill. My legislation requires that a consumer's 
consent to change service is verified so that discrepancies can be 
adjudicated quickly and efficiently. Like the 1996 Act, my bill 
requires a legal switch to include verification. However, my 
legislation enumerates the necessary elements of a valid verification. 
First, the bill requires verification to be maintained by the provider, 
either in the form of a letter from the consumer or by recording 
verification of the consumer's consent via the phone. The length that 
the verification must be maintained is to be determined by the FCC. 
Second, the bill stipulates the form that verification must take. 
Written verification remains the same as current regulations. Oral 
verification must include the voice of the subscriber affirmatively 
demonstrating that she wants her long distance provider to be changed; 
is authorized to make the change; and is currently verifying an 
imminent switch. The bill mandates oral verification to be conducted in 
a separate call from that of the telemarketer, by an independent, 
disinterested party. This verifying call must promptly disclose the 
nature and purpose of the call. Third, after a change has been 
executed, the new service provider must send a letter to the consumer, 
within five business days of the change in service, informing the 
consumer that the change, which he requested and verified, has been 
effected. Fourth, the bill mandates that a copy of verification be 
provided to the consumer upon request. Finally, the bill requires the 
FCC to finalize rules implementing these mandates within nine months of 
enactment of the bill.
  These procedures should help ensure that consumers can efficiently 
avail themselves of the phone service they seek, without being exposed 
to random and undetectable fraudulent switches. If an individual is 
switched without his or her consent, the mandate of recorded, 
maintained verification will provide the consumer with the proof 
necessary to prove that the switch was illegal.
  The second main provision of my legislation would provide consumers, 
or their public representatives, a legal right to pursue violators in 
court. Following the model of Senator Hollings' 1991 Telephone Consumer 
Protection Act, my bill provides aggrieved consumers with a private 
right of action in any state court which allows, under specific 
slamming laws or more general consumer protection statutes such an 
action. The 1991 Act has been adjudicated to withstand constitutional 
challenges on both equal protection and tenth amendment claims. Thus, 
the bill has the benefit of specifying one forum in which to resolve 
illegal switches of all types of service: long distance, in-state, and 
local service.
  Realizing that many individuals will not have the time, resources, or 
inclination to pursue a civil action, my bill also allows state 
Attorneys Generals, or other officials authorized by state law, to 
bring an action on behalf of citizens. Like the private right of action 
in suits brought by public officials damages are statutorily set at 
$1,000 or actual damages, whichever is greater. Treble damages are 
awarded in cases of knowing or willful violations. In addition to 
monetary awards, states are entitled to seek relief in the form of 
writs of mandamus, injunction, or similar relief. To ensure a proper 
role for the FCC, state actions must be brought in a federal district 
court where the victim or defendant resides. Additionally, state 
actions must be certified with the Commission, which maintains a right 
to intervening in an action. The bill makes express the fact that it 
has no impact on state authority to investigate consumer fraud or bring 
legal action under any state law.
  Finally, Mr. President, my legislation recognizes that neither 
legislators nor regulators can solve tomorrow's problems with today's 
technology. Therefore, my bill mandates that the FCC provide Congress 
with a report on other, less burdensome but more secure means of 
obtaining and recording consumer consent. Such methods might include 
utilization of Internet technology or issuing PIN numbers or customer 
codes to be used before carrier changes are authorized. The bill 
requires that the FCC report to Congress on such methodology not later 
than 180 days after enactment of this bill.
  Mr. President, I appreciate the opportunity to discuss my initiative 
to stop

[[Page S10430]]

slamming. Last year we came close to passing significant anti-slamming 
legislation. I hope that this issue can be addressed quickly this 
Congress. As a result, I would urge all my colleagues to cosponsor this 
legislation.
  I ask unanimous consent that the full text of the bill be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1527

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. FINDINGS; PURPOSE.

       (a) Findings.--Congress makes the following findings:
       (1) As the telecommunications industry has moved toward 
     competition in the provision of long distance telephone 
     services, consumers have increasingly elected to change the 
     carriers that provide their long distance telephone services. 
     As many as 50,000,000 consumers now change long distance 
     telephone service providers each year.
       (2) The fluid nature of the market for long distance 
     telephone services has also allowed an increasing number of 
     unauthorized changes of telephone service providers to occur. 
     Such changes have been called ``slamming'', a term which 
     denotes any practice in which a consumer's long distance 
     telephone service provider is changed without the consumer's 
     knowledge or consent.
       (3) Slamming accounts for the largest number of consumer 
     complaints received by the Common Carrier Bureau of the 
     Federal Communications Commission. As many as 1,000,000 
     consumers are subject to the unauthorized change of telephone 
     service providers each year.
       (4) The increased costs which consumers face as a result of 
     the unauthorized change of telephone service providers 
     threaten to deprive consumers of the financial benefits 
     created by a competitive marketplace in telephone services.
       (5) The burdens placed upon consumers by unauthorized 
     changes of telephone service providers will expand 
     exponentially as competition enters into the markets for 
     intraLATA and local telephone services.
       (6) The Telecommunications Act of 1996 sought to combat 
     unauthorized changes of telephone service providers by 
     requiring that a provider who changes a subscriber without 
     authorization pay the previously selected carrier an amount 
     equal to all charges paid by the subscriber after the change. 
     The Federal Communications Commission has proposed 
     regulations to implement this requirement. Implementing these 
     regulations will eliminate many of the financial incentives 
     to execute unauthorized changes of telephone service 
     providers. However, under current and proposed regulations 
     consumers have, and will continue to face, difficulty in 
     securing proof of unauthorized changes. Thus, enforcement of 
     the regulations will be impeded by a lack of tangible proof 
     of consumer consent to the change of telephone service 
     providers.
       (7) The interests of consumers require that telephone 
     service providers maintain evidence of their verification of 
     consumer consent to changes in telephone service providers. 
     This evidence should take the form of a consumer's written 
     consent or a recording of a consumer's oral consent obtained 
     by the telephone service provider or a third party.
       (8) Both Congress and the Federal Communications Commission 
     should continue to examine electronic means by which 
     consumers could most readily change telephone service 
     providers while ensuring that such changes would result only 
     from consumer action evidencing express consent to such 
     changes.
       (9) By providing consumers with a private right of action 
     in State court, if State law permits, against those who have 
     executed unauthorized changes of telephone service providers, 
     Congress insures in a constitutional manner that neither 
     Federal nor State courts will be overburdened with 
     litigation, while also providing the proper forum for such 
     actions given that competition will soon come to all segments 
     of the telephone service market.
       (10) The majority of consumers who have been subject to the 
     unauthorized change of telephone service do not seek redress 
     through the Federal Communications Commission. In light of 
     the general responsibilities of the States for consumer 
     protection, as well as the prosecutions against unauthorized 
     changes already undertaken by the States, it is essential 
     that the States be allowed to pursue actions on behalf of 
     their citizens, while also preserving the proper role of the 
     Federal Communications Commission in regulating the 
     telecommunications industry.
       (b) Purposes.--The purposes of this Act are--
       (1) to protect consumers from unauthorized changes of 
     telephone service providers;
       (2) to allow the efficient prosecution of legal actions 
     against telephone service providers who defraud consumers by 
     transferring telephone service providers without consumer 
     consent; and
       (3) to facilitate the ready selection of telephone service 
     providers by consumers.

     SEC. 2. ENHANCEMENT OF PROTECTIONS AGAINST UNAUTHORIZED 
                   CHANGES IN SUBSCRIBER SELECTIONS OF TELEPHONE 
                   SERVICE PROVIDERS.

       (a) Verification of Authorization.--
       (1) In general.--Subsection (a) of section 258 of the 
     Communications Act of 1934 (47 U.S.C. 258) is amended--
       (A) by striking ``(a) Prohibition.--No telecommunications'' 
     and inserting the following:
       ``(a) Prohibition.--
       ``(1) In general.--No telecommunications'';
       (B) in paragraph (1), as so designated, by inserting after 
     the first sentence the following: ``Such procedures shall 
     require the verification of a subscriber's selection of a 
     provider in written or oral form (including a signature or 
     voice recording) and shall require the retention of such 
     verification in such manner and form and for such time as the 
     Commission considers appropriate.''; and
       (C) by adding at the end the following:
       ``(2) Verification.--
       ``(A) In general.--For purposes of paragraph (1), the 
     verification of a subscriber's selection of a telephone 
     exchange service or telephone toll service provider shall 
     take the form of a written or oral communication (in the same 
     language as the solicitation of the selection) in which the 
     subscriber--
       ``(i) acknowledges the type of service to be changed as a 
     result of the selection;
       ``(ii) affirms the subscriber's intent to select the 
     provider as the provider of that service;
       ``(iii) affirms that the subscriber is authorized to select 
     the provider of that service for the telephone number in 
     question;
       ``(iv) acknowledges that the selection of the provider will 
     result in a change in providers of that service;
       ``(v) acknowledges that only one provider may provide that 
     service for that telephone number; and
       ``(vi) provides such other information as the Commission 
     considers appropriate for the protection of the subscriber.
       ``(B) Requirements for oral verifications.--An oral 
     verification of a change in telephone service providers under 
     this paragraph--
       ``(i) may not be made in the same communication in which 
     the change is solicited;
       ``(ii) may be made only to a qualified and independent 
     agent (as determined in accordance with regulations 
     prescribed by the Commission) of the provider concerned; and
       ``(iii) shall include a prompt and clear disclosure by the 
     agent that the purpose of the telephone call is to verify 
     that the subscriber has consented to the change.
       ``(C) Confirmation of change.--A provider submitting or 
     executing a change in telephone service providers shall 
     notify the subscriber concerned by mail of the change not 
     later than 5 business days after the date on which the change 
     is executed. The confirmation shall be provided in the 
     language in which the change was solicited.
       ``(D) Availability of verifications.--A provider shall make 
     available to a subscriber a copy of a verification under this 
     paragraph upon the request of the subscriber or an authorized 
     representative of the subscriber.''.
       (2) Regulations.--The Federal Communications Commission 
     shall complete the adoption of the regulations required under 
     section 258(a) of the Communications Act of 1934 by reason of 
     the amendments made by paragraph (1) not later than 270 days 
     after the date of enactment of this Act.
       (b) Additional Remedies.--Such section is further amended 
     by adding at the end the following:
       ``(c) Private Right of Action.--
       ``(1) Private right.--A person or entity may, if otherwise 
     permitted by the laws or rules of court of a State, bring in 
     an appropriate court of that State--
       ``(A) an action based on a violation of subsection (a) or 
     the regulations prescribed under such subsection to enjoin 
     such violation;
       ``(B) an action to recover for actual monetary loss from 
     such a violation or to receive $1,000 in damages for each 
     such violation, whichever is greater; or
       ``(C) both such actions.
       ``(2) Treble damages.--If the court finds that the 
     defendant willfully or knowingly violated subsection (a) or 
     the regulations prescribed under such subsection, the court 
     may, in its discretion, increase the amount of the award to 
     an amount equal to not more than 3 times the amount available 
     under paragraph (1)(B).
       ``(3) Costs of litigation.--The court, in issuing any final 
     order in an action brought pursuant to this subsection may 
     award costs of litigation (including reasonable attorney and 
     expert witness fees) to the prevailing plaintiff whenever the 
     court determines that such award is appropriate.
       ``(d) Actions by States.--
       ``(1) Authority of states.--
       ``(A) In general.--Whenever the attorney general of a 
     State, or an official or agency designated by a State, has 
     reason to believe that any person has engaged or is engaging 
     in an activity or practice of activities with respect to 
     residents of that State in violation of subsection (a) or the 
     regulations prescribed under such subsection, the State may 
     bring a civil action on behalf of its residents to enjoin 
     such activities, an action to recover for the greater of 
     actual monetary loss or $1,000 in damages for each violation, 
     or both such actions.
       ``(B) Treble damages.--If the court finds the defendant 
     willfully or knowingly violated such subsection or 
     regulations, the court may, in its discretion, increase the

[[Page S10431]]

     amount of the award to an amount equal to not more than 3 
     times the amount available under the subparagraph (A).
       ``(2) Exclusive jurisdiction of federal courts.--
       ``(A) In general.--The district courts of the United 
     States, the United States courts of any territory, and the 
     District Court of the United States for the District of 
     Columbia shall have exclusive jurisdiction over all civil 
     actions brought under this subsection.
       ``(B) Additional relief.--Upon proper application, such 
     courts shall also have jurisdiction to issue writs of 
     mandamus, or orders affording like relief, commanding the 
     defendant to comply with the provisions of subsection (a) or 
     regulations prescribed under such subsection, including the 
     requirement that the defendant take such action as is 
     necessary to remove the danger of such violation. Upon a 
     proper showing, a permanent or temporary injunction or 
     restraining order shall be granted without bond.
       ``(3) Rights of commission.--
       ``(A) Notice.--The State shall serve prior written notice 
     of any such civil action upon the Commission and provide the 
     Commission with a copy of its complaint, except in any case 
     where such prior notice is not feasible, in which case the 
     State shall serve such notice immediately upon instituting 
     such action.
       ``(B) Rights.--The Commission shall have the right--
       ``(i) to intervene in any action covered by subparagraph 
     (A);
       ``(ii) upon so intervening, to be heard on all matters 
     arising therein; and
       ``(iii) to file petitions for appeal.
       ``(4) Venue; service of process.--Any civil action brought 
     under this subsection in a district court of the United 
     States may be brought in the district wherein the defendant 
     or victim is found, wherein the defendant is an inhabitant or 
     transacts business, or wherein the violation occurred or is 
     occurring, and process in such cases may be served in any 
     district in which the defendant is an inhabitant or where the 
     defendant may be found.
       ``(5) Investigatory powers.--For purposes of bringing a 
     civil action under this subsection, nothing in this 
     subsection shall prevent the attorney general of a State, or 
     an official or agency designated by a State, from exercising 
     the powers conferred on the attorney general or such official 
     by the laws of such State to conduct investigations or to 
     administer oaths or affirmations or to compel the attendance 
     of witnesses or the production of documentary and other 
     evidence.
       ``(6) Effect on state court proceedings.--Nothing in this 
     subsection shall be construed to prohibit any official 
     authorized by State law from proceeding in State court on the 
     basis of an alleged violation of any civil or criminal 
     statute of such State.
       ``(7) Limitation.--Whenever the Commission has instituted a 
     civil action for violation of subsection (a) or there 
     regulations prescribed under such subsection, no State may, 
     during the pendency of such action instituted by the 
     Commission, subsequently institute a civil action against any 
     defendant named in the Commission's complaint for any 
     violation as alleged in the Commission's complaint.
       ``(8) Definition.--In this subsection, the term `attorney 
     general' means the chief legal officer of a State.''.

     SEC. 3. REPORT ON ELECTRONIC MEANS FOR VERIFYING SUBSCRIBER 
                   AUTHORIZATIONS OF SELECTIONS OF TELEPHONE 
                   SERVICE PROVIDERS.

       Not later than 180 days after the date of enactment of this 
     Act, the Federal Communications Commission shall submit to 
     Congress a report on the technological feasibility and 
     practicability of permitting subscribers to authorize changes 
     in telephone service providers by electronic means (including 
     authorization by electronic mail or by use of personal 
     identification numbers or other security mechanisms) without 
     thereby increasing the likelihood of unauthorized changes in 
     such providers.
                                 ______