BILL ANALYSIS
AB 2244
Page 1
Date of Hearing: May 7, 2002
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Lou Correa, Chair
AB 2244 (Wayne) - As Amended: April 29, 2002
SUBJECT : Prepaid calling cards and services.
SUMMARY : Mandates additional disclosure requirements and
protections for charges related to prepaid calling cards, and
also requires that disclosures be in both English and Spanish.
Specifically, this bill :
1)Expands the scope of charges that must be disclosed on a
prepaid calling card or packaging to include: surcharges,
taxes, other periodic fees, maintenance fees, connection
fees, payphone surcharges, international surcharges, and
surcharges of other specific periods of use.
2)Requires that all specified charges, rates, minimum charges,
definitions, policies, and customer service number be printed
in both English and Spanish on the card or packaging, and made
available in a prominent area at the point of sale.
3)Requires that companies provide pay telephone users of prepaid
calling cards or services with reasonable time to terminate a
call after notification of applicable payphone surcharges
without incurring any cost for the call.
4)Requires that toll-free customer service numbers have
sufficient capacity and staffing to accommodate a reasonably
anticipated number of calls without incurring a busy signal or
undue delay.
5)Prohibits a company from imposing any fee or surcharge that is
not disclosed as required or exceeds the amount disclosed.
6)Prohibits a company from imposing a charge if the consumer is
not connected to the number called.
7)Makes other clarifying or non-substantive amendments.
EXISTING LAW regulates the sale of prepaid calling cards and
services. It requires a company that sells prepaid calling
cards and services to make certain disclosures regarding fees
AB 2244
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and surcharges, and regulates the manner in which these fees are
imposed. It requires a company that sells prepaid calling cards
and services to maintain a toll-free customer service number.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of the bill . This bill is intended to provide
additional consumer protections for users of prepaid calling
cards. It broadens the list of charges that must be
disclosed, provides that disclosures be made in both English
and Spanish, and creates four new requirements: customer
service phone centers must be adequately staffed, undisclosed
fees cannot be charged, consumers cannot be charged for
unconnected calls, and payphone callers must be told about
surcharges and provided adequate time to end the call without
charge.
2)How calling cards work . Prepaid phone cards (or debit cards)
are generally used to make long distance telephone calls.
These cards are sold at many stores, markets, post offices,
pharmacies, gas stations, vending machines, as well as through
mail and the Internet. Phone cards are prepaid for specific
dollar amounts and offer consumers the convenience of making
calls without using cash or credit cards. Calls are made by
accessing a toll-free or carrier-specific number and activated
by using a Personal Identification Number (PIN) printed on the
back of the card. The cards provide long distance minutes
based on rates set by the carrier. As calls are made, the
usable minutes are automatically deducted from the card
balance. Some cards are also "rechargeable" by using a credit
card over the phone or through an Internet site.
3)Arguments in support . According to the author, "prepaid phone
cards with hidden fees and surcharges are being sold to
unsuspecting consumers? Consumers should know what product
they are getting prior to purchase. AB 2244 addresses this
problem by tightening current law to require specific
disclosures at the point of sale? [because] these cards are
being aggressively marketed in Spanish, the bill also requires
that point of sale disclosures be made in Spanish."
Some common fees and surcharges that are not adequately
disclosed include: service fees applied daily, weekly or
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monthly; per-call connection fees, some of which are applied
even if the call is not successfully connected; and surcharges
for using the card through a payphone.
The author further states that "The California Public Utilities
Commission reports that hundreds of complaints related to
prepaid phone cards have been filed in the last few years.
For a variety of reasons, it is likely that the number of
unreported claims in much higher. AB 2244 is a reasonable
step that will protect consumers without creating a negative
impact on the prepaid phone card industry, which, for the most
part, is providing a helpful service to consumers."
4)Arguments in opposition . One opponent (MCIWorldCom) argues
that the provisions to disclose taxes as well as surcharges
for international calls are an undue regulatory burden.
Regarding the international surcharge, "this would not be
feasible in light of the vast number of countries and
different surcharges ($1-$2). Furthermore, the specific
surcharge and rate is available through the customer service
number noted on the card." As for tax disclosure, federal
taxes are included in the rates. However, opponents claim
that it would be "impossible to note any state or local taxes,
again because the cards are produced for national distribution
and because those taxes would be constantly changing."
A larger complaint raised by both opponents (AT&T and
MCIWorldCom) is that disclosure in both English and Spanish
would be "unnecessary, impractical, expensive and burdensome."
According to AT&T, foreign language services are already
provided through their 800 number. Furthermore, phone cards
with disclosures are already produced in a number of different
languages, which are then ordered by retailers nationwide
depending on local demand for various languages. "Given the
national character of the prepaid calling card business, it
would be extremely impractical and cost prohibitive to change
to a mandatory bi-lingual card because there is no national
demand for such a card, and such a card would not work in
every market."
5)The question of disclosure language . This bill requires the
disclosure of various charges, information and policies in
English and Spanish on both the card/packaging and in "a
prominent area at the point of sale."
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The opposition understands this requirement to mean that all
prepaid phone cards must disclose all required information in
English and Spanish. This would mean that a card designed for
use by a Cantonese-speaking consumer would need to disclose
all rate information in all three languages, whether the
consumer could read that information or not. For phone cards
designed for consumers who speak a language other than English
or Spanish, this bill would seem to require a great deal of
additional disclosure in languages that would be of
questionable value to the consumer.
If it is the case, however, that a significant number of
primarily Spanish-speaking consumers (or any other language)
are forced to purchase cards in English because Spanish
language cards are not widely available, then there would
appear to be justification for mandating bilingual disclosure
in order to enhance consumer protection.
6)Related legislation . AB 1994 (Bowen), Chapter 802, Statutes
of 1998, required various cost disclosures for prepaid calling
cards, their packaging and/or their displays, while mandating
a 24-hour customer service number, a default expiration date,
and a refund for non-working cards.
REGISTERED SUPPORT / OPPOSITION :
Support
Consumer Action
Consumers Union
Office of Ratepayer Advocates, California Public Utilities
Commission
Office of the Attorney General
United Farm Workers
Opposition
AT&T
MCIWorldCom
Analysis Prepared by : Hank Dempsey / B. & P. / (916) 319-3301