BILL ANALYSIS
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|Hearing Date:June 10, 2002 |Bill No:AB |
| |2244 |
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SENATE COMMITTEE ON BUSINESS AND PROFESSIONS
Senator Liz Figueroa, Chair
Bill No: AB 2244Author:Wayne
As Amended:May 13, 2002 Fiscal: No
SUBJECT: Prepaid calling cards and services.
SUMMARY: Expands the disclosure of prepaid calling card
fees or charges, adds restrictions on how fees or charges
are imposed and how a prepaid calling card company operates
it's required customer service telephone number, and
requires that mandated disclosures be made in any language
that is used on the prepaid card, its packaging,
advertising or promotion.
Existing law:
1)Regulates the sale of prepaid telecommunications
(telephone) calling cards and services, as defined.
2)Requires prepaid calling card price advertisements to
disclose any applicable geographical limitations and any
additional surcharges or fees.
3)Requires the name of the calling card company, a
toll-free customer service number, a toll-free network
access number and any authorization code - if required to
access service - and the expiration date or policy, if
applicable, to be printed legibly on a prepaid calling
card.
4)Requires a company that provides or issues prepaid
calling cards and services to disclose on the card or
packaging, and requires a vendor who sells the card to
disclose in a prominent area at the point of sale, the
following information : (a) any surcharges or fees
including monthly fees, (b) per-call access fees, (c)
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surcharges for the first minute of use applicable to
calls within the United States, (d) whether there are
additional or different rates or unit values applicable
to international calls, (e) the definition of "unit" if
applicable, (f) the minimum charge per call, (g) the
charge for calls that do not connect, if any, (h) the
billing decrement, (i) the calling card company name, (j)
the recharge, refund, and expiration policies, if any,
and (k) the 24-hour customer service toll-free telephone
number.
5)Requires a company that provides or issues a prepaid card
or services to maintain a 24-hour, seven day a week,
toll-free customer service number with a live operator to
answer incoming calls, and through which customers may
lodge complaints and obtain information regarding:
rates, surcharges, and fees; recharge, refund, and
expiration policies; and the balance of use in the
customer's account, if applicable.
This bill:
1)Expands the list of specified fees and charges that must
be disclosed to include: surcharges, taxes, periodic
fees in addition to monthly fees, maintenance fees,
connection fees, pay telephone surcharges, the actual
international call surcharges, and the surcharges for
periods of use in addition to the first minute for calls
within the United States.
2)Requires that the above fees or charges, together with
the other information that is already required to be
disclosed by current law in a prominent area at the point
of sale by a vendor, also be disclosed "clearly and
conspicuously" and "immediately proximate" to the point
of sale.
3)Requires that if a language other than English is used on
the card or packaging to provide dialing instructions or
to contact customer service, then the required disclosure
of fees and other information must also be provided in
that language in the required point of sale disclosure.
4)Requires that if a language other than English is used in
card advertising or promotions, or on the card or
packaging itself, other than for dialing instructions,
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then the required disclosure of fees and other
information must also be made in that language on the
card or packaging and in the required point of sale
disclosure.
5)Requires that the company's toll-free customer service
number have sufficient capacity and staffing to
accommodate a reasonably anticipated number of calls
without incurring a busy signal or undue wait.
6)Requires that a company provide pay telephone users of
prepaid calling cards or services with a reasonable time
to terminate a call after being given notification of any
applicable pay phone surcharges without incurring any
charge for the call.
7)Prohibits a company from imposing a fee or surcharge that
is not disclosed as required or that exceeds the amount
disclosed by the company.
8)Prohibits a company from imposing any charge if the
consumer is not connected to the number called.
9)Makes other clarifying or technical changes to the law.
FISCAL EFFECT: Legislative Counsel has determined that
this is a non-fiscal bill.
COMMENTS:
1.Purpose. This bill is sponsored by the author to
strengthen and increase the disclosures consumers receive
regarding the purchase and use of prepaid calling cards.
The bill is also intended to provide the disclosures to
consumers in a language they can understand and which is
used by the calling card company to give the dialing/use
instructions and in its advertising to consumers to
induce them to buy the cards. The bill broadens the list
of disclosable charges so that consumers will have a more
accurate idea of the actual cost. The bill requires
adequate staffing of customer service numbers, provides
that undisclosed fees cannot be charged, prohibits
charges for unconnected calls, and provides payphone
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users with sufficient time to disconnect and avoid
charges once they are told what the charges will be.
2.Background - 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 the 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, which is either recorded on the card
itself or on a central computer through which the long
distance calls are routed. Some cards are also
"rechargeable" by using a credit card over the phone or
through an Internet website.
3.Arguments in Support. According to the author, prepaid
calling cards with hidden fees and surcharges are being
sold to unsuspecting consumers. The author and
proponents argue that consumers should be able to know
what product they are getting prior to its purchase - so
that they can know the actual costs of the card and can
comparison shop for prepaid phone services. The author
also states that the California Public Utilities
Commission reports that hundreds of complaints related to
prepaid phone cards have been filed with them over the
last few years. The author states that the bill
addresses the problem of hidden charges by tightening and
broadening current law to require that information
regarding additional types of surcharges and fees are
disclosed both on the card and at the point of sale.
Further, the bill will make these disclosures more
understandable by requiring them to be made in the same
language that is used to market them and on instructions
for how to use them.
Currently, the author and proponents argue that some common
fees associated with these cards are not adequately
disclosed. These include service fees that are applied
daily, weekly or monthly and can range from 3 cents to 50
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cents per day, 12 cents to $1 weekly, or 50 cents to $2
monthly. Also there are per-call connection fees ranging
from 25 cents to $2.50, sometimes when a call is not even
connected, and also payphone surcharges for making a
payphone call using the prepaid calling card. The bill
will require disclosure of the existence of, and
particularly the amount of these fees, which the consumer
may not have known will use up a card's useable calling
minutes faster than anticipated.
The author and proponents also argue that the bill's
disclosures should help to prevent surprising fees that
detract from the value of the prepaid calling card
services that are purchased. Further, the author and
proponents believe the bill will require prepaid calling
card companies to fully honor the spirit of the existing
law requirements to maintain a customer service phone
line by requiring it to be adequately staffed and have
sufficient call capacity to respond to the number of
anticipated consumer calls. Finally, the author
indicates that he is continuing to work with the Attorney
General and calling card company representatives on
refining some of the bill's requirements.
NOTE: Double-referral to the Senate Energy, Utilities and
Communications Committee
SUPPORT AND OPPOSITION:
Support:California Attorney General;
Office of Ratepayer Advocates (ORA) of the
California Public Utilities Commission
United Farmworkers of America, AFL-CIO
Consumer Action
Consumers Union
Service Employees International Union, AFL-CIO, CLC
Older Women's League of California
Opposition:None reported to the Committee as of June 6,
2002.
Consultant:Jay J. DeFuria