[House Report 111-507]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     111-507
======================================================================
 
                  CALLING CARD CONSUMER PROTECTION ACT

                                _______
                                

 June 15, 2010.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Waxman, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3993]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 3993) to require accurate and reasonable 
disclosure of the terms and conditions of prepaid telephone 
calling cards and services, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     6
Background and Need for Legislation..............................     6
Legislative History..............................................     7
Committee Consideration..........................................     7
Committee Votes..................................................     8
Committee Oversight Findings and Recommendations.................     8
New Budget Authority, Entitlement Authority, and Tax Expenditures     8
Statement of General Performance Goals and Objectives............     8
Constitutional Authority Statement...............................     8
Earmarks and Tax and Tariff Benefits.............................     8
Advisory Committee Statement.....................................     8
Applicability of Law to the Legislative Branch...................     8
Federal Mandates Statement.......................................     9
Committee Cost Estimate..........................................     9
Congressional Budget Office Estimate.............................     9
Section-by-Section Analysis of the Legislation...................    10
Explanation of Amendments........................................    13
Changes in Existing Law Made by the Bill, as Reported............    13

                               AMENDMENT

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

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

SEC. 2. DEFINITIONS.

  For purposes of this Act, the following definitions apply:
          (1) The term ``Commission'' means the Federal Trade 
        Commission.
          (2) The term ``prepaid calling card'' has the meaning given 
        the term ``prepaid calling card'' by section 64.5000(a) of the 
        Federal Communications Commission's regulations (47 C.F.R. 
        64.5000(a)). Such term shall also include calling cards that 
        use VoIP service or a successor protocol. Such term shall also 
        include an electronic or other mechanism that allows users to 
        pay in advance for a specified amount of calling. Such term 
        shall not include--
                  (A) calling cards or other rights of use that are 
                provided for free or at no additional cost as a 
                promotional item accompanying a product or service 
                purchased by a consumer;
                  (B) any card, device, or other right of use, the 
                purchase of which establishes a customer-carrier 
                relationship with a provider of wireless 
                telecommunications service or wireless hybrid service, 
                or that provides access to a wireless 
                telecommunications service or wireless hybrid service 
                account wherein the purchaser has a pre-existing 
                relationship with the wireless service provider; or
                  (C) payphone service, as that term is defined in 
                section 276(d) of the Communications Act of 1934 (47 
                U.S.C. 276(d)).
          (3) The term ``prepaid calling card provider'' has the 
        meaning given the term ``prepaid calling card provider'' by 
        section 64.5000(b) of the Federal Communications Commission's 
        regulations (47 C.F.R. 64.5000(b)). Such term shall also 
        include--
                  (A) a provider of a prepaid calling card that uses 
                VoIP service or a successor protocol; and
                  (B) a provider of a prepaid calling card that allows 
                users to pay in advance for a specified amount of 
                minutes through an electronic or other mechanism.
          (4) The term ``prepaid calling card distributor'' means any 
        entity or person that purchases prepaid calling cards from a 
        prepaid calling card provider or another prepaid calling card 
        distributor and sells, re-sells, issues, or distributes such 
        cards to one or more distributors of such cards or to one or 
        more retail sellers of such cards. Such term shall not 
        include--
                  (A) any retail seller whose only activity with 
                respect to the sale of prepaid calling cards is point-
                of-sale transactions with end-user customers; or
                  (B) any person whose only activity with respect to 
                the sale of prepaid calling cards is the transport or 
                delivery of such cards.
          (5) The term ``wireless hybrid service'' is defined as a 
        service that integrates both commercial mobile radio service 
        (as defined by section 20.3 of the Federal Communications 
        Commission's regulations (47 C.F.R. 20.3)) and VoIP service.
          (6) The term ``VoIP service'' has the meaning given the term 
        ``interconnected Voice over Internet protocol service'' by 
        section 9.3 of the Federal Communications Commission's 
        regulations (47 C.F.R. 9.3). Such term shall include any voice 
        calling service that utilizes a voice over Internet protocol or 
        any successor protocol in the transmission of the call.
          (7) The term ``fees'' includes all charges, fees, taxes, or 
        surcharges applicable to a prepaid calling card that are--
                  (A) required by Federal law or regulation or order of 
                the Federal Communications Commission or by the laws 
                and regulations of any State or political subdivision 
                of a State; or
                  (B) expressly permitted to be assessed under Federal 
                law or regulation or order of the Federal 
                Communications Commission or under the laws and 
                regulations of any State or political subdivision of a 
                State.
          (8) The term ``additional charge'' means any charge assessed 
        by a prepaid calling card provider or prepaid calling card 
        distributor for the use of a prepaid calling card, other than a 
        fee or rate.
          (9) The term ``international preferred destination'' means 
        one or more specific international destinations named on a 
        prepaid calling card or on the packaging material accompanying 
        a prepaid calling card.

SEC. 3. REQUIRED DISCLOSURES OF PREPAID CALLING CARDS.

  (a) Required Disclosure.--Any prepaid calling card provider or 
prepaid calling card distributor shall accurately disclose the 
following information relating to the terms and conditions of the 
prepaid calling card:
          (1) The name of the prepaid calling card provider and such 
        provider's customer service telephone number and hours of 
        service, except that the hours of service may not be required 
        to be disclosed if the provider's customer service is provided 
        and available 24 hours a day, 7 days per week.
          (2)(A) The number of domestic interstate minutes available 
        from the prepaid calling card and the number of available 
        minutes for all international preferred destinations served by 
        the prepaid calling card at the time of purchase; or
          (B) the dollar value of the prepaid calling card, the 
        domestic interstate rate per minute provided by such card, and 
        the applicable per minute rates for all international preferred 
        destinations served by the prepaid calling card at the time of 
        purchase.
          (3)(A) The applicable per minute rate for all individual 
        international destinations served by the card at the time of 
        purchase; or
          (B) a toll-free customer service number and website (if the 
        provider maintains a website) where a consumer may obtain the 
        information described in subparagraph (A) and a statement that 
        such information may be obtained through such toll-free 
        customer service number and website.
          (4) The following terms and conditions pertaining to, or 
        associated with, the use of the prepaid calling card:
                  (A) Any applicable fees associated with the use of 
                the prepaid calling card.
                  (B) A description of any additional charges 
                associated with the use of the prepaid calling card and 
                the amount of such charges.
                  (C) Any limitation on the use or period of time for 
                which the promoted or advertised minutes or rates will 
                be available.
                  (D) A description of the applicable policies relating 
                to refund, recharge, and any predetermined decrease in 
                value of such card over a period of time.
                  (E) Any expiration date applicable to the prepaid 
                calling card or the minutes available with such calling 
                card.
  (b) Location of Disclosure and Language Requirement.--
          (1) Clear and conspicuous.--
                  (A) Cards.--The disclosures required under subsection 
                (a) shall be printed in plain English language (except 
                as provided in paragraph (2)) in a clear and 
                conspicuous manner and location on the prepaid calling 
                card, except as the Commission may provide under 
                paragraph (3). If the card is enclosed in packaging 
                that obscures the disclosures on the card, such 
                disclosures also shall be printed on the outside 
                packaging of the card.
                  (B) Online services.--In addition to the requirements 
                under subparagraph (A), in the case of a prepaid 
                calling card that consumers purchase via the Internet, 
                the disclosures required under subsection (a) shall be 
                displayed in plain English language (except as provided 
                in paragraph (2)) in a clear and conspicuous manner and 
                location on the Internet website that the consumer must 
                access prior to purchasing such card.
                  (C) Advertising and other promotional material.--Any 
                advertising or other promotional material for a prepaid 
                calling card that contains any representation, 
                expressly or by implication, regarding the dollar 
                value, the per minute rate, or the number of minutes 
                provided by the card shall include in a clear and 
                conspicuous manner and location all the disclosures 
                described in subsection (a), except as the Commission 
                may provide under paragraph (3).
          (2) Foreign languages.--If a language other than English is 
        prominently used on a prepaid calling card, its packaging, or 
        in point-of-sale advertising, Internet advertising, or 
        promotional material for such card, the disclosures required by 
        this section shall be disclosed in that language on such card, 
        packaging, advertisement, or promotional material.
          (3) Different location of certain information as determined 
        by commission.--Notwithstanding the requirements of paragraph 
        (1), the Commission may determine that some of the information 
        required to be disclosed pursuant to subsection (a) does not 
        need to be disclosed on the prepaid calling card, advertising, 
        or other promotional material, if the Commission by 
        regulation--
                  (A) requires the information to be otherwise 
                disclosed and available to consumers; and
                  (B) determines that--
                          (i) such disclosures provide for easy 
                        comprehension and comparison by consumers; and
                          (ii) the remaining disclosures on the prepaid 
                        calling card, advertising, or other promotional 
                        material, include sufficient information to 
                        allow a consumer to effectively inquire about 
                        or seek clarification of the services provided 
                        by the calling card.
  (c) Minutes Announced, Promoted, or Advertised Through Voice 
Prompts.--Any information provided to a consumer by any voice prompt 
given to the consumer at the time the consumer uses the prepaid calling 
card relating to the remaining value of the calling card or the number 
of minutes available from the calling card shall be accurate, taking 
into account the application of the fees and additional charges 
required to be disclosed under subsection (a).
  (d) Disclosures Required Upon Purchase of Additional Minutes.--If a 
prepaid calling card permits a consumer to add value to the card or 
purchase additional minutes after the original purchase of the prepaid 
calling card, any changes to the rates or additional charges required 
to be disclosed under subsection (a) shall apply only to the additional 
minutes to be purchased and shall be disclosed clearly and 
conspicuously to the consumer before the completion of such purchase.
  (e) No False, Misleading, or Deceptive Disclosures.--No prepaid 
calling card, packaging, advertisement, or other promotional material 
containing a disclosure required pursuant to this section shall contain 
any false, misleading, or deceptive representations relating to the 
terms and conditions of the prepaid calling card.

SEC. 4. FEDERAL TRADE COMMISSION AUTHORITY.

  (a) Unfair and Deceptive Act or Practice.--A violation of section 3 
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 any 
provision of the Federal Trade Commission Act or any other provision of 
law and solely for purposes of this Act, common carriers subject to the 
Communications Act of 1934 (47 U.S.C. 151 et seq.) and any amendment 
thereto shall be subject to the jurisdiction of the Commission.
  (c) Rulemaking Authority.--Not later than 1 year after the date of 
enactment of this Act, the Commission shall, in consultation with the 
Federal Communications Commission and in accordance with section 553 of 
title 5, United States Code, issue regulations to carry out this Act. 
In promulgating such regulations, the Commission shall--
          (1) take into consideration the need for clear disclosures 
        that provide for easy comprehension and comparison by 
        consumers, taking into account the size of prepaid calling 
        cards; and
          (2) give due consideration to the views of the Federal 
        Communications Commission with regard to matters for which that 
        Commission has particular expertise and authority and shall 
        take into consideration the views of States.
In promulgating such regulations, the Commission may prescribe 
requirements concerning the order, format, presentation, and design of 
disclosures required by this Act and may establish and require the use 
of uniform terms, symbols, or categories to describe or disclose fees 
and additional charges, if the Commission finds that such requirements 
will assist consumers in making purchasing decisions and effectuate the 
purposes of this Act. The Commission shall not issue regulations that 
otherwise specify the rates, terms, and conditions of prepaid calling 
cards.
  (d) Savings Provision.--Nothing in this Act shall be construed to 
limit the authority of the Commission under any other provision of law. 
Except to the extent expressly provided in this Act, nothing in this 
Act shall be construed to alter or affect the exemption for common 
carriers provided by section 5(a)(2) of the Federal Trade Commission 
Act (15 U.S.C. 45(a)(2)). Nothing in this Act is intended to limit the 
authority of the Federal Communications Commission.
  (e) Coordination.--If the Federal Communications Commission initiates 
a rulemaking proceeding to establish requirements relating to the 
disclosure of terms and conditions of prepaid calling cards, the 
Federal Communications Commission shall coordinate with the Federal 
Trade Commission to ensure that any such requirements are not 
inconsistent with the requirements of this Act and the regulations 
issued under subsection (c).

SEC. 5. 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 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 utility commission or 
        other consumer protection agency, if authorized by State law, 
        or 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, or any other 
        court of competent jurisdiction to--
                  (A) enjoin that practice;
                  (B) enforce compliance with this Act;
                  (C) obtain damage, restitution, or other compensation 
                on behalf of residents of the State; or
                  (D) obtain such other relief as the court may 
                consider to be appropriate.
          (2) Notice to the commission.--
                  (A) In general.--Before filing an action under 
                paragraph (1), the State shall provide to the 
                Commission--
                          (i) written notice of the action; and
                          (ii) a copy of the complaint for the action.
                  (B) Exemption.--
                          (i) In general.--Subparagraph (A) shall not 
                        apply with respect to the filing of an action 
                        by a State under this subsection, if the 
                        attorney general or other appropriate officer 
                        determines that it is not feasible to provide 
                        the notice described in that subparagraph 
                        before the filing of the action.
                          (ii) Notification.--In an action described in 
                        clause (i), the State shall provide notice and 
                        a copy of the complaint to the Commission at 
                        the same time as the State files the action.
  (b) Intervention by Commission.--
          (1) In general.--On receiving notice under subsection (a)(2), 
        the Commission shall have the right to intervene in the action 
        that is the subject of the notice.
          (2) Effect of intervention.--If the Commission intervenes in 
        an action under subsection (a), it shall have the right--
                  (A) to be heard with respect to any matter that 
                arises in that action;
                  (B) to remove the action to the appropriate United 
                States District Court; and
                  (C) to file a petition for appeal.
  (c) Construction.--For purposes of bringing any civil action under 
subsection (a), nothing in this section shall be construed to prevent 
an attorney general of a State, a State utility commission, or other 
consumer protection agency authorized by State law from exercising the 
powers conferred on the attorney general or other appropriate official 
by the laws of that State to--
          (1) conduct investigations;
          (2) administer oaths or affirmations;
          (3) compel the attendance of witnesses or the production of 
        documentary and other evidence; or
          (4) enforce any State law.
  (d) Action by the Commission May Preclude State Action.--In any case 
in which an action is instituted by or on behalf of the Commission for 
violation of this Act, or any regulation issued under this Act, no 
State may, during the pendency of that action, institute an action 
under subsection (a) against any defendant named in the complaint in 
that action for violation of this Act or regulation.
  (e) Venue; Service of Process.--
          (1) Venue.--Any action brought under subsection (a) may 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. 6. APPLICATION.

  This Act shall apply to--
          (1) any prepaid calling card issued or placed into the stream 
        of commerce beginning 180 days after the date on which final 
        regulations are promulgated pursuant to section 4(c); and
          (2) any advertising, promotion, point-of-sale material or 
        voice prompt regarding a prepaid calling card that is 
        disseminated beginning 180 days after the date on which final 
        regulations are promulgated pursuant to section 4(c).

SEC. 7. EFFECT ON STATE LAWS.

  After the date on which final regulations are promulgated pursuant to 
section 4(c), no State or political subdivision of a State may 
establish or continue in effect any provision of law that contains 
requirements regarding disclosures to be printed on prepaid calling 
cards or packaging unless such requirements are identical to the 
requirements of section 3.

SEC. 8. STUDIES.

  (a) GAO Study.--Beginning 2 years after the date on which final 
regulations are promulgated pursuant to section 4(c), 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 Congress not later than 3 years after the date of enactment of 
this Act.
  (b) FTC Study.--The Commission shall, in consultation with the 
Federal Communications Commission, conduct a study of the extent to 
which the business practices of the prepaid calling card industry 
intended to be addressed by this Act exist in the prepaid wireless 
industry and shall submit a report of such study, including 
recommendations, if any, to Congress not later than 3 years after the 
date of enactment of this Act.

                          PURPOSE AND SUMMARY

    H.R. 3993 was introduced on November 3, 2009, by Rep. Eliot 
L. Engel (D-NY). H.R. 3993 is intended to prevent fraud and 
abuse in the prepaid calling card industry and to provide 
consumers with accurate and understandable information about 
the rates, fees, terms, and conditions associated with 
particular cards.

                  BACKGROUND AND NEED FOR LEGISLATION

    The prepaid calling card market is a large and growing 
industry. The cards are appealing because they allow the 
purchaser to call another phone, even overseas, from anywhere 
in the United States without committing to a long term 
relationship with a phone company. Also, they often offer 
consumers significantly reduced per minute rates. In 2007, 
American consumers spent roughly $4 billion dollars on these 
cards.\1\ These cards are generally marketed to particular 
groups of consumers, including immigrants, college students, 
and military personnel.\2\ For many immigrants living in the 
U.S., the prepaid calling card is the primary method for 
staying in touch with family abroad.\3\
---------------------------------------------------------------------------
    \1\Prepaid phone card industry under attack, MSNBC.com (Oct. 23, 
2008) (online at http://www.msnbc.msn.com/id/27327684).
    \2\Mark E. Budnitz, Martina Rojo, and Julia Marlowe, Deceptive 
Claims for Prepaid Telephone Cards and the Need for Regulation, 19 
Loyola Consumer L. Rev. 1 (2006).
    \3\Talk Isn't So Cheap on a Phone Card, Business Week (July 23, 
2007) (online at http://www.businessweek.com/magazine/content/07_30/
b4043079.htm).
---------------------------------------------------------------------------
    Unfortunately, the prepaid calling card market is permeated 
by fraudulent and deceptive practices. Studies have found that 
many of the prepaid calling cards sold in the marketplace today 
fail to deliver the full number of advertised minutes.\4\ In 
2007, the Hispanic Institute conducted a study of prepaid 
calling cards to determine what percentage of minutes consumers 
could expect to receive from the standard prepaid calling 
card.\5\ On average, the study found that consumers could 
expect to receive only 60% of the minutes promised on the 
card.\6\ Moreover, of the 45 cards tested, eight cards provided 
less than half of the minutes promised and seven cards failed 
to produce any minutes at all.\7\ Similarly, the Federal Trade 
Commission (FTC) reviewed consumer complaints in this area and 
noted a range of problems associated with prepaid calling 
cards. The FTC observed that many prepaid calling cards contain 
hidden charges, such as connection fees, maintenance fees, 
disconnect fees, and inconsistent rate-per-minute surcharges, 
which result in cards that do not produce the number of minutes 
promised to the consumer at the point of sale.\8\ In short, 
consumers often find that because of misleading information, 
inconsistent claims, and buried disclosures, they receive 
significantly less than they bargained for, with little 
recourse.
---------------------------------------------------------------------------
    \4\Fraud plagues prepaid calling card market, Associated Press 
(Oct. 6, 2008) (online at http://www.msnbc.msn.com/id/27052474/).
    \5\The Hispanic Institute, Calling Card Verification Test Plan 
(2007) (online at http://thehispanicinstitute.net/files/
Test%20Plan.pdf).
    \6\The Hispanic Institute, Facts & Figures (online at http://
thehispanicinstitute.net/research/callingcard/scamfacts).
    \7\The Hispanic Institute, Calling Card Verification Test Plan 
(2007) (online at http://thehispanicinstitute.net/files/
Test%20Plan.pdf).
    \8\Federal Trade Commission, Buying Time: The Facts About Pre-Paid 
Phone Cards (Mar. 2008) (online at http://www.ftc.gov/bcp/edu/pubs/
consumer/products/pro04.shtm).
---------------------------------------------------------------------------
    To address these issues, H.R. 3993 would require calling 
card providers and distributors to clearly and conspicuously 
disclose all relevant and applicable information to consumers. 
These disclosures would include contact information for the 
provider, the number of minutes available or the dollar value 
of the card. Entities also would be required to disclose any 
applicable fees, additional charges, limitations, changes in 
value, or expiration dates associated with the use of the card. 
In some cases, these disclosures also would be required to 
appear on calling card advertisements and voice prompts. The 
bill would provide the FTC with the authority to enforce these 
requirements and to promulgate regulations to carry out the 
Act. States also are authorized to enforce the Act.

                          LEGISLATIVE HISTORY

    The Calling Card Consumer Protection Act was first 
introduced on August 3, 2007, by Rep. Engel in the 110th 
Congress as H.R. 3402. The House passed the bill under 
suspension of the rules by a voice vote on September 25, 2008.
    In the 111th Congress, Rep. Engel re-introduced the Calling 
Card Consumer Protection Act on November 3, 2009, and H.R. 3993 
was referred to the Committee on Energy and Commerce. The bill 
was referred to the Subcommittee on Commerce, Trade, and 
Consumer Protection on November 4, 2010, and the Subcommittee 
held a legislative hearing to examine the bill on December 3, 
2009. Testimony was heard from witnesses representing the 
Division of Marketing Practices of the FTC; the National 
Consumer League; the New York State Public Service Commission 
as a member of the National Association of Regulatory Utility 
Commissioners; the United African Organization; and the 
American Wholesale Marketers Association.

                        COMMITTEE CONSIDERATION

    On March 24, 2010, the Subcommittee met in open markup 
session to consider H.R. 3993. The Subcommittee approved a 
manager's amendment by Mr. Rush and subsequently forwarded H.R. 
3993, amended, favorably to the full Committee by a voice vote.
    On May 5, 2010, the Committee on Energy and Commerce met in 
open markup session to consider H.R. 3993 as approved by the 
Subcommittee. The Committee agreed to a manager's amendment to 
the bill by a voice vote. The Committee subsequently ordered 
H.R. 3993 favorably reported to the House, amended, by a voice 
vote.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list each record vote 
on the motion to report legislation and amendments thereto. 
There were no record votes taken during consideration and 
passage of H.R. 3993. The Committee agreed to a motion by Mr. 
Waxman to order H.R. 3993 favorably reported to the House, 
amended, by a voice vote.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the oversight findings and recommendations of the Committee are 
reflected in the descriptive portions of this report, including 
those regarding fraud and deceptive practices in the prepaid 
calling card market.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee adopts as its own the 
estimate of budget authority and revenues regarding H.R. 3993 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974. The Committee finds that H.R. 3993 would result in no new 
budget authority, entitlement authority, or tax expenditures or 
revenues.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the performance goals and 
objectives of H.R. 3993 are reflected in the descriptive 
portions of this report, including the need to provide 
consumers with clear and conspicuous information regarding 
prepaid calling cards.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
constitutional authority for H.R. 3993 is provided in Article 
I, section 8, clauses 3 and 18 of the Constitution of the 
United States.

                  EARMARKS AND TAX AND TARIFF BENEFITS

    H.R. 3993 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI of the Rules of the House of 
Representatives.

                      ADVISORY COMMITTEE STATEMENT

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., section 5(b) of the Federal 
Advisory Committee Act.

             APPLICABILITY OF LAW TO THE LEGISLATIVE BRANCH

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to terms and conditions of 
employment or access to public services and accommodations. 
H.R. 3993 requires commercial entities that provide or 
distribute calling cards to disclose the terms, conditions, and 
fees related to the prepaid calling cards. This bill does not 
relate to employment or access to public services and 
accommodations in the legislative branch.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimates of federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act of 1974 (as amended by section 
101(a)(2) of the Unfunded Mandates Reform Act, P.L. 104-4).

                        COMMITTEE COST ESTIMATE

    Pursuant to clause 3(d)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee adopts as its own the 
cost estimate of H.R. 3993 prepared by the Director of the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    With respect to the requirements of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives, the 
following is the cost estimate on H.R. 3993 provided by the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974:

                                                      June 7, 2010.
Hon. Henry A. Waxman,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3993, the Calling 
Card Consumer Protection Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 3993--Calling Card Consumer Protection Act

    H.R. 3993 would establish new requirements for information 
that must be displayed on prepaid telephone calling cards, on 
their packaging, and in advertisements for the cards. The bill 
would require the Federal Trade Commission (FTC) to develop 
regulations within one year of enactment that would specify the 
information to be displayed, including the company name, the 
number of minutes available, the dollar amount of the card, and 
the expiration date. Within three years of enactment of H.R. 
3993, the FTC and the Government Accountability Office would be 
required to report to the Congress on the results of studies on 
the business practices of the calling card industry and the 
effectiveness of the disclosures required by the bill.
    Based on information from the FTC, CBO estimates that 
implementing the bill's requirements would cost about $1 
million over the 2011-2015 period, assuming appropriation of 
the necessary amounts, to cover the costs to write and enforce 
new regulations and prepare reports. Enacting H.R. 3993 would 
not affect direct spending or revenues; therefore, pay-as-you-
go procedures would not apply.
    H.R. 3993 contains intergovernmental and private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
The bill would preempt laws in at least four states that 
require disclosures to be printed on calling cards. The bill 
also would impose notification requirements and limitations on 
State Attorneys General, utility commissions, and consumer 
protection agencies. Because the limits on state authority 
would not require the expenditure of funds and because the 
notification requirements would result in minimal additional 
spending, CBO estimates that the costs of the mandates would be 
small and would not exceed the threshold established in UMRA 
($70 million in 2010, adjusted annually for inflation).
    By requiring the providers of prepaid calling cards to 
disclose information about the provider and the terms and 
conditions of the service on each calling card, its packaging, 
and advertisements, the bill would impose a private-sector 
mandate as defined in UMRA. According to industry sources, most 
providers already adhere to the requirements in the bill as 
part of their standard business practice. Further, those 
sources indicate that the incremental cost to providers that do 
not meet the standards in the bill would be small. Therefore, 
CBO estimates that the aggregate cost of the mandate would fall 
well below the annual threshold established in UMRA for 
private-sector mandates ($141 million in 2010, adjusted 
annually for inflation).
    The CBO staff contacts for this estimate are Susan Willie 
(for federal costs), Elizabeth Cove Delisle (for the state and 
local impact), and Sam Wice (for the private-sector impact). 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    Section 1 provides that the Act may be cited as the 
``Calling Card Consumer Protection Act''.

Section 2. Definitions

    Section 2 contains the definitions that apply to the act.
    Paragraph (1) identifies ``Commission'' as referring to the 
Federal Trade Commission (FTC).
    Paragraph (2) provides that ``prepaid calling card'' has 
the meaning given the term by Federal Communication Commission 
(FCC) regulation (47 C.F.R. 64.5000(a)). The term also includes 
Voice over Internet Protocol (VoIP) and electronic or other 
mechanisms that would allow a user to pay in advance for a 
specified amount of calling. The term excludes calling cards 
that are provided to consumers free of charge, prepaid wireless 
service, and payphone services as defined by the Communications 
Act of 1934.
    Paragraph (3) incorporates the definition of ``prepaid 
calling card provider'' as set forth in FCC regulation (47 
C.F.R. 64.5000(b)), and also includes providers that utilize 
VoIP, as well as providers who allow their customers to pay in 
advance for their service electronically or otherwise.
    Paragraph (4) defines ``prepaid calling card distributor'' 
as an entity that purchases prepaid calling cards from a 
prepaid calling card provider or other distributor and then 
sells or resells those cards to other distributors or retail 
sellers. The term excludes any retail seller engaged solely in 
point-of-sale transactions of prepaid calling cards and any 
distributer who merely transports or delivers such cards.
    Paragraph (5) defines ``wireless hybrid service'' as a 
service that integrates both commercial mobile radio service 
(as defined in FCC regulation 47 C.F.R. 20.3) and VoIP service.
    Paragraph (6) defines the term ``VoIP service'' to have the 
same meaning as the term ``interconnected Voice over Internet 
Protocol service'' in 47 C.F.R. 9.3. It also includes any voice 
calling service that utilizes VoIP or any successor protocol in 
the transmission of the call.
    Paragraph (7) defines ``fees'' as referring to all charges, 
fees, taxes, or surcharges applied to a prepaid calling card 
that either are required or expressly permitted by federal, 
state, or local laws and regulations.
    Paragraph (8) defines ``additional charge'' as any charge 
assessed by a prepaid calling card provider or prepaid calling 
card distributor on a calling card that is neither a fee nor a 
rate.
    Paragraph (9) defines the term ``international preferred 
destination'' as one or more specific international 
destinations named either on a prepaid calling card or on the 
accompanying packaging materials.

Section 3. Required disclosures of prepaid calling cards

    Section 3(a) requires prepaid calling card providers and 
prepaid calling card distributors to accurately disclose 
certain information relating to the terms and conditions of the 
prepaid calling card. Required disclosures include: the name of 
and contact information for the provider; information about the 
number of available minutes at the time of purchase or the 
dollar value of the card with the applicable per minute rates 
at the time of purchase; any applicable fees, additional 
charges, limitations of use, refunds or decreases in card 
value; and expiration dates associated with the use of the 
prepaid calling card.
    Section 3(b) requires that the disclosures must be clear 
and conspicuous and must be located on the prepaid calling card 
unless the FTC determines otherwise through rulemaking. Section 
3(b) also requires clear and conspicuous disclosures on Web 
sites that sell calling cards, as well as on advertising and 
promotional materials that contain any representation regarding 
the card's dollar value, per minute rate, or the number of 
minutes. In addition, if a language other than English is used 
on a prepaid calling card, its packaging, or certain 
advertising or promotional materials, the disclosures required 
under section 3(a) must also be in that language. Finally, 
section 3(b) provides the FTC with the flexibility to require 
shorter disclosures on calling cards and advertisements or 
other promotional materials, but not on Web sites that sell 
calling cards.
    Section 3(c) requires that any information provided to 
consumers by way of voice prompts concerning the remaining 
value of the card or the number of minutes available, must be 
accurate and take into account the various fees and charges 
associated with the card.
    Section 3(d) provides that if the rates change or 
additional charges are imposed when a consumer purchases 
additional minutes or adds value to a prepaid calling card, 
such rate changes or additional charges shall only apply to the 
additional minutes being purchased. In addition, the new rates 
or additional charges must be clearly and conspicuously 
disclosed to the consumer before the completion of the 
purchase.
    Section 3(e) prohibits false, misleading, or deceptive 
representations about the prepaid calling card terms and 
conditions on any calling card, packaging, advertisement, or 
other promotional material containing a disclosure required by 
the Act.

Section 4. Federal Trade Commission authority

    Section 4(a) states that a violation of section 3 shall be 
treated as a violation of a rule defining an unfair or 
deceptive act or practice under section 18(a)(1)(b) of the FTC 
Act (15 U.S.C. 57a(a)(1)(b)).
    Section 4(b) provides the FTC with authority to enforce the 
Act in the same manner and by the same means as though the Act 
incorporated the FTC Act and with jurisdiction over common 
carriers for purposes of this Act.
    Section 4(c) provides the FTC with the authority to issue 
regulations pursuant to section 553 of title 5, United States 
Code. In promulgating regulations under this section, the FTC 
must take into consideration the need for clear disclosures and 
give due consideration to the views of the FCC and the states. 
In addition, the FTC is provided with the discretion to 
promulgate rules that prescribe requirements concerning the 
order, format, presentation, and design of disclosures required 
under this Act, as well as concerning the use of a common set 
of terms, symbols, and categories to describe a prepaid calling 
card's fees or charges. The FTC may not, however, issue any 
regulations that otherwise specify the rates, terms, and 
conditions of prepaid calling cards.
    Section 4(d) provides that nothing in the Act is intended 
to limit the authority of the FTC or the FCC. Section 4(d) also 
states that except to the extent expressly provided in the Act, 
nothing in the Act shall be construed to alter or affect the 
exemption for common carriers set forth in the FTC Act.
    Section 4(e) provides that if the FCC should initiate a 
rulemaking proceeding to establish requirements relating to the 
terms and conditions of prepaid calling cards, the FCC must 
coordinate with the FTC to ensure consistency with the 
requirements of this Act and the regulations issued by the FTC.

Section 5. State enforcement

    Section 5 gives the states the authority to enforce the 
provisions of this Act. Before bringing an action under the 
Act, a state must provide the FTC with written notice of the 
action and a copy of the complaint, unless the provision of 
notice is not feasible. In addition, the FTC is entitled to 
intervene in any action brought by a state under the Act.

Section 6. Application

    Section 6 provides that the requirements of the Act apply 
to prepaid calling cards that are issued, and advertisements 
that are disseminated, 180 days after the date on which the FTC 
issues final regulations pursuant to section 4(c) of the Act.

Section 7. Effect on state laws

    Section 7 preempts state laws that contain requirements 
regarding disclosures to be printed on prepaid calling cards or 
packaging unless the requirements are identical to the 
disclosure requirements in this Act.

Section 8. Studies

    Section 8(a) requires Government Accountability Office to 
conduct a study on the effectiveness of the Act two years after 
the final regulations are promulgated by the FTC.
    Section 8(b) requires the FTC, in consultation with the 
FCC, to conduct a study of the extent to which the business 
practices of the prepaid calling card industry intended to be 
addressed by this Act exist in the prepaid wireless industry.

                       EXPLANATION OF AMENDMENTS

    At Subcommittee markup of H.R. 3993, Chairman Rush offered 
a bipartisan manager's amendment that made several technical 
and substantive changes to the bill. The amendment excluded 
from the definition of ``prepaid calling card distributor'' 
certain retail merchants and persons who merely engage in the 
transport or delivery of prepaid calling cards. In addition, 
the amendment clarified that no calling card, packaging, 
advertisement, or other promotional material containing a 
disclosure required by the Act shall contain any false, 
misleading, or deceptive representation relating to the terms 
and conditions of the card. The amendment also clarified 
section 4(c) to ensure that the FTC has adequate rulemaking 
authority to develop disclosures that will protect consumers 
and allow users of prepaid calling cards to comparison shop. 
Furthermore, the amendment included a limited preemption 
section similar to the preemption language in the bill as it 
passed the House in the 110th Congress. Finally, the amendment 
required the FTC, in consultation with the FCC, to conduct a 
study of the prepaid wireless industry.
    During the full Committee markup, Chairman Waxman offered a 
manager's amendment that made one technical change to the bill. 
The bipartisan amendment provides the FTC with flexibility to 
narrow the disclosures required to be placed on advertising and 
other promotional material. The FTC already has this 
flexibility under the bill with respect to prepaid calling 
cards.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    There are no changes in existing federal law made by the 
bill, as reported.

                                  
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