[Congressional Record Volume 155, Number 42 (Tuesday, March 10, 2009)]
[Senate]
[Pages S2967-S2970]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. NELSON, of Florida (for himself, Ms. Snowe, and Ms. 
        Klobuchar):
  S. 562. A bill to require accurate and reasonable disclosure of the 
terms and conditions of prepaid telephone calling cards and services, 
and for other purposes; to the Committee on Commerce, Science, and 
Transportation.
  Mr. NELSON of Florida. Mr. President, prepaid telephone calling cards 
are used by many Americans to stay in touch with loved ones around the 
country and throughout the world. Unfortunately, some providers and 
distributors of these cards are scamming consumers--by imposing 
undisclosed junk fees, charging exorbitant rates, and selling cards 
that expire shortly after consumers start using them.
  Over the past couple of years, a number of State Attorneys General 
and the Federal Trade Commission have opened investigations and found 
that a number of providers and distributors are engaging in unfair and 
deceptive business practices. These practices include charging 
customers for calls where they receive busy signals, imposing weekly 
``maintenance fees'' that may take away up to 20 percent of the card's 
overall value, and billing for calls in 3-minute increments.
  As a result of these investigations, some companies have been fined 
or have entered into consent decrees forbidding them from engaging in 
some deceptive practices. In addition, some states--including Florida--
have imposed certain regulatory requirements on prepaid calling card 
providers and distributors. To date, however, neither the Federal 
Communications Commission nor the Federal Trade Commission has taken 
any action to impose up-front nationwide consumer protection 
requirements on this industry. This lack of federal standards allows 
many of these unscrupulous operators to move from state to state, and 
create new ``shell companies'' to escape consumer protection 
regulations. This is

[[Page S2968]]

wrong, and I think we need to fix this situation.
  That's why I rise today to introduce the Prepaid Calling Card 
Consumer Protection Act of 2009.
  The Prepaid Calling Card Consumer Protection Act of 2009 requires the 
Federal Trade Commission to draft comprehensive rules requiring all 
prepaid telephone calling card providers and distributors to disclose 
the rates and fees associated with their calling cards up-front, at the 
point of sale. It also requires providers who market their cards in 
languages other than English to disclose rates and fees in that 
language as well. Furthermore, the legislation requires providers to 
honor the cards for at least a year after the time the card is first 
used.
  To enforce these disclosure requirements, the bill gives the Federal 
Trade Commission, State Attorneys General, and state consumer 
protection advocates the ability to sue the fraudsters who violate 
these requirements in federal court. In addition, the law preserves 
additional state consumer protection requirements--such as state 
utility commission certification or bonding requirements.
  I invite my colleagues to join with Senators Snowe, Klobuchar and 
myself in supporting the Prepaid Calling Card Consumer Protection Act 
of 2009. We should waste no time in ensuring that military 
servicemembers, seniors, immigrants and other Americans using these 
prepaid telephone calling cards are protected from bad actors in the 
marketplace.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 562

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Prepaid Calling Card 
     Consumer Protection Act of 2009''.

     SEC. 2. DEFINITIONS.

       In this Act:
       (1) Commission.--The term ``Commission'' means the Federal 
     Trade Commission.
       (2) Fees.--
       (A) In general.--The term ``fees'' means all charges, fees, 
     taxes, or surcharges, including connection, hang-up, service, 
     payphone, and maintenance charges, which may be--
       (i) required by State or Federal statute or by regulation 
     or order of the Commission or a State; or
       (ii) permitted to be assessed by a State or Federal statute 
     or by regulation or order of the Commission or a State.
       (B) Exclusion.--The term ``fees'' does not include the 
     applicable per unit or per-minute rate for the particular 
     destination called by a consumer.
       (3) International preferred destination.--The term 
     ``international preferred destination'' means a specific 
     international destination named on a prepaid telephone 
     calling card or on the packaging material accompanying a 
     prepaid telephone calling card.
       (4) Prepaid telephone calling card.--
       (A) In general.--The terms ``prepaid telephone calling 
     card'' and ``card'' mean--
       (i) a card or similar device that allows users to pay in 
     advance for a specified amount of calling, without regard to 
     additional features, functions, or capabilities available in 
     conjunction with a prepaid telephone calling service; or
       (ii) any right of use purchased in advance for a sum 
     certain linked to an access number and authorization code 
     that--

       (I) enables a consumer to use a prepaid telephone calling 
     service; and
       (II) is embodied on a card or other physical object, or 
     purchased by an electronic or telephonic means through which 
     the purchaser obtains access numbers and authorization codes 
     that are not physically located on a card, its packaging, an 
     Internet website, or other promotional materials.

       (B) Exclusion.--The terms ``prepaid telephone calling 
     card'' and ``card'' do not include cards or other rights of 
     use that provide access to--
       (i) service provided for free, or at no additional charge 
     as a promotional item accompanying a product or service 
     purchased by a consumer; or
       (ii) a wireless telecommunications service account with a 
     wireless service provider that the purchaser has a 
     preexisting relationship with or establishes a carrier 
     customer relationship with via the purchase of a prepaid 
     wireless telecommunications service handset package.
       (5) Prepaid telephone calling card distributor.--
       (A) In general.--The term ``prepaid telephone calling card 
     distributor'' means any person that--
       (i) purchases prepaid telephone calling cards or services 
     from a prepaid telephone calling service provider; and
       (ii) sells, resells, issues, or distributes prepaid 
     telephone calling cards to 1 or more distributors of such 
     cards or to 1 or more retail sellers of such cards.
       (B) Exclusion.--The term ``prepaid telephone calling card 
     distributor'' does not include any retail merchant or seller 
     of prepaid telephone calling cards exclusively engaged in 
     point-of-sale transactions with end-user customers.
       (6) Prepaid telephone calling service.--
       (A) In general.--The terms ``prepaid telephone calling 
     service'' and ``service'' mean any real time voice 
     communications service, regardless of the technology or 
     network utilized, paid for in advance by a consumer, that 
     allows a consumer to originate voice telephone calls through 
     a local, long distance, or toll-free access number and 
     authorization code, whether manually or electronically 
     dialed.
       (B) Exclusion.--The terms ``prepaid telephone calling 
     service'' and ``service'' do not include any service that 
     provides access to a wireless telecommunications service 
     account if the purchaser has a preexisting relationship with 
     the wireless service provider or establishes a carrier-
     customer relationship via the purchase of a prepaid wireless 
     telecommunications service handset package.
       (7) Prepaid telephone calling service provider.--The term 
     ``prepaid telephone calling service provider'' means any 
     person providing prepaid telephone calling service to the 
     public using its own, or a resold, network offering real time 
     voice communications service regardless of the technology 
     utilized.
       (8) Wireless telecommunications service.--The term 
     ``wireless telecommunications service'' has the meaning given 
     the term ``commercial mobile service'' in section 332(d) of 
     the Communications Act of 1934 (47 U.S.C. 332(d)).

     SEC. 3. REQUIRED DISCLOSURES OF PREPAID TELEPHONE CALLING 
                   CARDS OR SERVICES.

       (a) Required Disclosure; Rulemaking.--Not later than 180 
     days after the date of enactment of this Act, the Commission 
     shall prescribe regulations that require every prepaid 
     telephone calling service provider or prepaid telephone 
     calling card distributor to disclose the following 
     information relating to the material terms and conditions of 
     the prepaid telephone calling card or service:
       (1) Information relating to domestic interstate calls.--
       (A) The number of calling units or minutes of domestic 
     interstate calls provided by such card or service at the time 
     of purchase; or
       (B) the dollar value of such card or service and the 
     domestic interstate rate per-minute provided by such card or 
     service at the time of purchase.
       (2) Information relating to international preferred 
     destinations.--The applicable calling unit or per-minute 
     rates for each international preferred destinations served by 
     such card or service.
       (3) Information relating to individual international 
     destinations.--
       (A) The applicable calling unit or per-minute rates for 
     each individual international destinations served by such 
     card or service.
       (B) That the applicable calling unit or per-minute rates 
     for each individual international destination may be obtained 
     through the prepaid telephone calling card provider's toll-
     free customer service number and Internet website.
       (C) Whether those rates fluctuate.
       (4) Other material terms and conditions.--Other material 
     terms and conditions pertaining to the use of such card or 
     service, including--
       (A) the amount and frequency of all fees;
       (B) a description of applicable policies relating to 
     refund, recharge, decrement, or expiration; and
       (C) limitations, if any, on the use or period of time for 
     which the displayed, promoted, or advertised minutes or rates 
     will be available to the customer.
       (5) Service provider information.--Information relating to 
     the service provider, including--
       (A) the name of the service provider;
       (B) the address of such service provider, which shall be 
     made available on the provider's website (if any), together 
     with the uniform resource locator address thereof; and
       (C) a toll-free telephone number that may be used to 
     contact the customer service department of such service 
     provider, together with the hours of service of the customer 
     service department.
       (b) Clear and Conspicuous Disclosure of Required 
     Information and Language Requirements.--In prescribing 
     regulations under subsection (a), the Commission shall 
     require, at a minimum, that--
       (1) the required disclosures (other than the disclosure 
     required by subsection (a)(3)(A)) for prepaid telephone 
     calling cards are printed in plain English in a clear and 
     conspicuous location on the card, or on the packaging of the 
     card, so as to be plainly visible to a consumer at the point 
     of sale;
       (2) the required disclosures (other than the disclosure 
     required by subsection (a)(3)(B)) for prepaid telephone 
     calling service that consumers access and purchase via the 
     Internet are displayed in plain English in a clear and 
     conspicuous location on the Internet site from which the 
     consumer purchases such service, and include conspicuous 
     instructions and directions to any link to such disclosures;

[[Page S2969]]

       (3) the required disclosures (other than the disclosure 
     required by subsection (a)(3)(A)) for advertising and other 
     promotional materials are printed on any advertising for the 
     prepaid telephone calling card or service used at the point 
     of sale, including on any signs for display by retail 
     merchants, displayed on any Internet site used to promote 
     material, and on any other promotional material used at the 
     point of sale that is prepared by, or at the direction of, 
     any person that is subject to the requirements of this Act; 
     and
       (4) if a language other than English is predominantly used 
     on a prepaid telephone calling card or its packaging, or in 
     the point-of-sale advertising, Internet advertising, or 
     promotional material of a prepaid telephone calling card or 
     prepaid telephone calling service, then the required 
     disclosures are provided in that language on such card, 
     packaging, advertisement, or promotional material in the same 
     manner as if they were provided in English.
       (5) if a language other than English is predominantly used 
     on a prepaid telephone calling card or its packaging, or in 
     the point-of-sale advertising, or promotional materials of a 
     prepaid telephone calling card or prepaid telephone calling 
     service, then the customer service department reached via a 
     toll-free number must provide basic customer support (per-
     minute rate or equivalent calling units for each destination, 
     fees, and terms of service) in that language.
       (c) Implementing Regulations.--The Commission may, in 
     accordance with section 553 of title 5, United States Code, 
     prescribe such other disclosure regulations as the Commission 
     determines are necessary to implement this section.

     SEC. 4. UNLAWFUL CONDUCT RELATED TO PREPAID TELEPHONE CALLING 
                   CARDS.

       (a) Prepaid Telephone Calling Service Provider.--It shall 
     be unlawful for any prepaid telephone calling service 
     provider to do any of the following:
       (1) Undisclosed fees and charges.--To assess or deduct from 
     the balance of a prepaid telephone calling card any fee or 
     other amount for use of the prepaid telephone calling 
     service, except--
       (A) the per-minute rate or value for each particular 
     destination called by the consumer; and
       (B) fees that are disclosed in accordance with the 
     regulations prescribed under section 3.
       (2) Minutes and rates as promoted and advertised.--With 
     respect to a prepaid telephone calling card for a service of 
     the prepaid telephone calling service provider, to provide 
     fewer minutes than the number of minutes promoted or 
     advertised, or to charge a higher per-minute rate to a 
     specific domestic destination or international preferred 
     destination than the per-minute rate to that specific 
     destination promoted or advertised, on--
       (A) the prepaid telephone calling card;
       (B) any point-of-sale material relating to the card that is 
     prepared by or at the direction of the prepaid telephone 
     calling card service provider; or
       (C) other advertising related to the card or service.
       (3) Minutes announced, promoted, and advertised through 
     voice prompts.--To provide fewer minutes than the number of 
     minutes announced, promoted, or advertised through any voice 
     prompt given by the prepaid telephone calling service 
     provider to a consumer at the time the consumer places a call 
     to a dialed domestic destination or international preferred 
     destination with a prepaid telephone calling card or service.
       (4) Expiration.--To provide, sell, resell, issue, or 
     distribute a prepaid telephone calling card that expires--
       (A) before the date that is 1 year after the date on which 
     such card is first used; or
       (B) in the case of a prepaid telephone calling card or 
     service that permits a consumer to purchase additional usage 
     minutes or add additional value to the card, before the date 
     that is 1 year after the date on which the consumer last 
     purchased additional usage minutes or added additional value 
     to the card.
       (5) Charges for unconnected calls.--To assess any fee or 
     charge for any unconnected telephone call. For purposes of 
     this paragraph, a telephone call shall not be considered 
     connected if the person placing the call receives a busy 
     signal or if the call is unanswered.
       (6) Maximum billing increments.--To assess or deduct a per-
     minute rate (or equivalent calling unit) in an increment 
     greater than 1 minute of calling time for calls that are less 
     than 1 full minute. It shall not be a violation of this 
     section for a prepaid telephone calling service provider to 
     deduct different destination-specific rates (or equivalent 
     calling units) for each full minute of calling time in 
     accordance with properly disclosed rates or other terms and 
     conditions.
       (b) Prepaid Telephone Calling Card Distributor.--It shall 
     be unlawful for any prepaid telephone calling card 
     distributor to do any of the following:
       (1) Undisclosed fees and charges.--To assess or deduct from 
     the balance of a prepaid telephone calling card any fee or 
     other amount for use of the prepaid telephone calling 
     service, except--
       (A) the per-minute rate or value for each particular 
     destination called by the consumer; and
       (B) fees that are disclosed as required by regulations 
     prescribed under section 3.
       (2) Minutes as promoted and advertised.--To sell, resell, 
     issue, or distribute any prepaid telephone calling card that 
     the distributor knows provides fewer minutes than the number 
     of minutes promoted or advertised, or a higher per-minute 
     rate to a specific destination than the per-minute rate to 
     that specific destination promoted or advertised, on--
       (A) the prepaid telephone calling card that is prepared by 
     or at the direction of the prepaid telephone calling card 
     service distributor;
       (B) any point of sale material relating to the card that is 
     prepared by or at the direction of the prepaid telephone 
     calling card service distributor; or
       (C) other advertising relating to the card or service.
       (3) Minutes announced, promoted, or advertised through 
     voice prompts.--To sell, resell, issue, or distribute a 
     prepaid telephone calling card that such distributor knows 
     provides fewer minutes than the number of minutes announced, 
     promoted, or advertised through any voice prompt given to a 
     consumer at the time the consumer places a call to a dialed 
     destination with the prepaid telephone calling card or 
     service.
       (4) Expiration.--To provide, sell, resell, issue, or 
     distribute a prepaid telephone calling card that expires--
       (A) before the date that is 1 year after the date on which 
     such card is first used; or
       (B) in the case of a prepaid telephone calling card that 
     permits a consumer to purchase additional usage minutes or 
     add additional value to the card or service, before the date 
     that is 1 year after the date on which the consumer last 
     purchased additional usage minutes or added additional value 
     to the card or service.
       (c) Liability.--A prepaid telephone calling service 
     provider or a prepaid telephone calling card distributor may 
     not avoid liability under this section by stating that the 
     displayed, announced, promoted, or advertised minutes, or the 
     per-minute rate to a specific destination, are subject to 
     fees or charges. A prepaid calling service provider or 
     prepaid calling distributor shall not be liable for the 
     disclosure of lawful fees, charges, or limitations made 
     pursuant to regulations prescribed by the Commission under 
     section 3, including lawful conditions of use.
       (d) Implementing Regulations.--The Commission may, in 
     accordance with section 553 of title 5, United States Code, 
     prescribe such regulations as the Commission determines are 
     necessary to implement this section.

     SEC. 5. ENFORCEMENT BY THE FEDERAL TRADE COMMISSION.

       (a) Unfair and Deceptive Act or Practice.--Notwithstanding 
     any other provision of law, a violation of a regulation 
     prescribed under section 3 or the commission of an unlawful 
     act proscribed under section 4 shall be treated as a 
     violation of a rule defining an unfair or deceptive act or 
     practice prescribed under section 18(a)(1)(B) of the Federal 
     Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).
       (b) Authority of the Commission.--The Commission shall 
     enforce this Act in the same manner and by the same means as 
     though all applicable terms and provisions of the Federal 
     Trade Commission Act were incorporated into and made a part 
     of this Act. Notwithstanding section 5(a)(2) of the Federal 
     Trade Commission Act (15 U.S.C. 45(a)(2), communications 
     common carriers shall be subject to the jurisdiction of the 
     Commission exclusively for the purposes of this Act, and 
     section 5(a)(2) shall not be otherwise affected.
       (c) Federal Communications Commission Authority.--
       (1) To the extent that the Federal Trade Commission has 
     authority under this Act with respect to prepaid calling 
     cards, prepaid calling card providers and prepaid calling 
     card distributors, the Federal Communications Commission 
     shall not exercise any authority that it may otherwise have 
     with respect to such cards, providers and distributors;
       (2) Except as provided in paragraph (1), nothing in this 
     Act affects the authority of the Federal Communications 
     Commission with respect to such prepaid calling card 
     providers and distributors.

     SEC. 6. STATE ENFORCEMENT.

       (a) In General.--
       (1) Civil actions.--In any case in which the attorney 
     general of a State, a State utility commission, or other 
     authorized State consumer protection agency has reason to 
     believe that an interest of the residents of that State has 
     been or is threatened or adversely affected by the engagement 
     of any person in a practice that is prohibited under this 
     Act, the State, as parens patriae, may bring a civil action 
     on behalf of the residents of that State in a district court 
     of the United States of appropriate jurisdiction--
       (A) to enjoin that practice;
       (B) to enforce compliance with this Act;
       (C) to obtain damage, restitution, or other compensation on 
     behalf of residents of the State; or
       (D) to obtain such other relief as the court may consider 
     to be appropriate.
       (2) Notice to federal trade commission.--
       (A) In general.--Before filing an action under paragraph 
     (1), the attorney general of a State, a State utility 
     commission, or an authorized State consumer protection agency 
     shall provide to the Commission--
       (i) written notice of the action; and
       (ii) a copy of the complaint for the action.

[[Page S2970]]

       (B) Exemption.--
       (i) In general.--Subparagraph (A) shall not apply to the 
     filing of an action under paragraph (1) if the attorney 
     general of a State, a State utility commission, or an 
     authorized State consumer protection agency filing such 
     action determines that it is not feasible to provide the 
     notice described in subparagraph (A) before the filing of the 
     action.
       (ii) Notification.--In an action described in clause (i), 
     the attorney general of a State, a State utility commission, 
     or an authorized State consumer protection agency shall 
     provide notice and a copy of the complaint to the Commission 
     at the time the action is filed.
       (b) Intervention by Federal Trade Commission.--
       (1) In general.--Upon receiving notice under subsection 
     (a)(2), the Commission may intervene in the action that is 
     the subject of such notice.
       (2) Effect of intervention.--If the Commission intervenes 
     in an action under subsection (a), the Commission may--
       (A) be heard with respect to any matter that arises in that 
     action; and
       (B) file a petition for appeal.
       (c) Construction.--Nothing in this Act may be construed to 
     prevent an attorney general of a State, a State utility 
     commission, or an authorized State consumer protection agency 
     from exercising the powers conferred on the attorney general, 
     a State utility commission, or an authorized State consumer 
     protection agency by the laws of that State--
       (1) to conduct investigations;
       (2) to administer oaths or affirmations;
       (3) to compel the attendance of witnesses or the production 
     of documentary and other evidence;
       (4) to enforce any State consumer protection laws of 
     general applicability; or
       (5) to establish or utilize existing administrative 
     procedures to enforce the provisions of the law of such 
     State.
       (d) Venue; Service of Process.--
       (1) Venue.--Any action brought under subsection (a) shall 
     be brought in the district court of the United States that 
     meets applicable requirements relating to venue under section 
     1391 of title 28, United States Code.
       (2) Service of process.--In an action brought under 
     subsection (a), process may be served in any district in 
     which the defendant--
       (A) is an inhabitant; or
       (B) may be found.

     SEC. 7. APPLICATION.

       The regulations prescribed under section 3 and the 
     provisions of sections 3 and 4 shall apply to any prepaid 
     telephone calling card issued or placed into the stream of 
     commerce, and to any advertisement, promotion, point-of-sale 
     material or voice prompt regarding a prepaid telephone 
     calling service that is created or disseminated more than 120 
     days after the date on which the regulations prescribed under 
     section 3 are published in the Federal Register.

     SEC. 8. EFFECT ON STATE LAW.

       (a) Preemption.--
       (1) In general.--Except as otherwise provided in this 
     section, this Act preempts the laws of any State or political 
     subdivision thereof to the extent that such laws are 
     inconsistent with this Act, or the rules, regulations, or 
     orders issued by the Commission under this Act.
       (2) Exceptions.--This Act shall not preempt any provision 
     of State law or enforcement action that provides additional 
     enforcement protection to consumers of prepaid telephone 
     calling cards if such provision of law or enforcement 
     action--
       (A) imposes higher fines or more punitive civil or criminal 
     remedies, including injunctive relief, for any violation of 
     this Act, or the rules, regulations, or orders issued by the 
     Commission under this Act; or
       (B)(i) relates to terms, conditions, or issues that are not 
     addressed by this Act, or by the rules, regulations, or 
     orders issued by the Commission under this Act; and
       (ii) is not determined by the Commission to be inconsistent 
     with the public interest.
       (b) Petitions Concerning Preemption.--
       (1) Petitions by providers.--
       (A) Authority to petition.--A prepaid telephone calling 
     card provider or a prepaid telephone calling card distributor 
     may submit a petition to the Commission to challenge a State 
     law or regulation--
       (i) as inconsistent with this Act or the rules, 
     regulations, or orders issued by the Commission under this 
     Act; or
       (ii) as inconsistent with the public interest, if the 
     measure relates to terms, conditions, or issues that are not 
     addressed by this Act, or the rules, regulations, or orders 
     issued by the Commission under this Act.
       (B) Deadline for commission action.--Within 90 days after 
     receiving a petition under subparagraph (A), the Commission 
     shall issue a final determination on the issues presented in 
     the petition. The Commission may issue an order staying the 
     effectiveness of any State law or regulation that is the 
     subject of the petition during, but for no longer than, such 
     90-day period.
       (2) Proceedings on unaddressed issues.--If, on the basis of 
     any petition under paragraph (1), the Commission determines 
     that a term, condition, or issue is not addressed by sections 
     3 or 4 of this Act, or the rules issued by the Commission 
     under this section 3 of this Act, the Commission shall, 
     within 180 days after the date of such determination, conduct 
     an inquiry or other proceeding to determine whether the 
     Commission should, in the public interest, promulgate a rule, 
     pursuant to section 3(c), to address such term, condition, or 
     issue.

     SEC. 9. GAO STUDY.

       Beginning 1 year after the date on which final regulations 
     are promulgated pursuant to section 3(a), the Comptroller 
     General shall conduct a study of the effectiveness of this 
     Act and the disclosures required under this Act and shall 
     submit a report of such study to the House Committee on 
     Energy and Commerce and the Senate Committee on Commerce, 
     Science, and Transportation no later than 2 years after the 
     date of enactment of this Act.

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