[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\
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\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).
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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).
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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.