NEWSReport No. CC 95-35 COMMON CARRIER ACTION June 14, 1995 NEW FCC RULES WILL CURB "SLAMMING," PROTECT CONSUMERS FROM UNAUTHORIZED SWITCHING OF LONG DISTANCE CARRIERS The FCC today announced the adoption of new rules to protect consumers from the practice of changing a consumer's long distance carrier without the customer's knowledge or approval, a practice commonly known as "slamming". In announcing these new rules, the Commission noted that it now receives about 750 slamming complaints each month in addition to the tens of thousands of complaints received annually by local exchange carriers (LECs) and state regulatory bodies. The Commission stated that, for any competitive market to work efficiently, consumers must have information about their possible market choices and the opportunity to make their own choices about the products and services they buy. Slamming takes choices away from consumers and distorts the long distance competitive market by rewarding companies that engage in deceptive and misleading marketing practices. Therefore, the Commission has adopted rules that will serve as an informative and useful consumer protection mechanism and an important rule of fair competition for the long distance telephone industry. The Commission stated that its new rules draw clear, bright lines for carriers and consumers to use in creating and responding to long distance marketing. FCC rules require that a company must obtain a customer's authorization in order to change his or her long distance service. One method of obtaining this authorization is by a Letter of Agency (LOA), by which the customer indicates, in writing, that he or she wishes to switch long distance companies. The Commission found that many long distance carriers combined LOAs in a confusing way with promotional inducements, such as contest entries, prize giveaways and checks, which are designed to attract new customers. As a result, recipients may be unaware that by signing the document to enter the contest, claim the prizes, or cash the check, they also are supposedly "authorizing" the company to change their long distance carrier. The new rules seek to remedy that confusion without limiting consumers' choices and without unduly restricting the means that long distance companies use to reach consumers. The Commission initiated this rulemaking on its own motion in 1994, in response to complaints about this practice and to an overall increase in the number of slamming complaints generally. (over) -2- The Commission's new rules are designed to prevent consumer confusion by requiring that inducements be separate or severable from the LOA, that the LOA be limited strictly to authorizing a change in long distance carrier, and that it be clearly identified as an LOA. These rules also prescribe the minimum contents of the LOA, require that it be written in clear and unambiguous language and that the print of be of sufficient size and readable style, generally comparable in font and size to the promotional materials, to be clear to the consumer that the document, if signed, would change his or her long distance carrier. The rules also prohibit all "negative option" LOAs, allow only the name of the long distance carrier setting the consumer's rates to appear on the LOA and require that LOAs contain full translations if they employ more than one language. The same rules apply to LOAs sent to businesses and residences. The Commission's new rules also protect consumers who receive higher bills as a result of being slammed. These consumers will be required to pay only the toll charges they would have paid to the original interexchange carrier. The Commission noted that, if the practice of slamming continues unabated, it may reconsider whether consumers should be required to pay any charges at all under such circumstances. The Commission exempted certain checks from the separate or severable requirement, finding that these checks are seldom the cause of consumer confusion. Under this rule, the Commission will require that a valid LOA/inducement check contain only the required LOA language and the necessary information to make it a negotiable instrument, and shall not contain any promotional material. The Commission also stated that it expects carriers to continue to place the required LOA language near the signature line on the back of the check. In addition, the Commission required carriers to print on the front of the check, in easily readable, bold-faced type, a notice that the consumer is authorizing a change in his or her interexchange carrier. The Commission's new rules will require that each LOA contain: the subscriber's billing name and address and each telephone number to be covered by the change order; a line stating that subscriber's decision to change from his or her current interexchange carrier to this new carrier; a statement that the subscriber designates this new carrier to act as the agent for this change; and a statement that the subscriber understands that there may be a charge for this change. These rules will take effect 60 days after publication in the Federal Register. Action by the Commission June 13, 1995, by Report and Order (FCC 95-225). Chairman Hundt, Commissioners Quello, Barrett, Ness and Chong. -FCC- News media contact: Susan Lewis Sallet at (202) 418-1500. Common Carrier Bureau contact: Wilbert Nixon at (202) 418-0960.