BILL ANALYSIS                                                                                                                                                                                                    



                                                                       


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          |SENATE RULES COMMITTEE            |                  AB 2244|
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                                 THIRD READING


          Bill No:  AB 2244
          Author:   Wayne (D), et al
          Amended:  6/29/02 in Senate
          Vote:     21

           
           SENATE BUSINESS & PROFESSIONS COMMITTEE  :  7-0, 6/10/02
          AYES:  Figueroa, Johannessen, Machado, Morrow, Murray,  
            O'Connell, Polanco

           SENATE ENERGY, U.&C. COMMITTEE  :  7-1, 6/25/02
          AYES:  Bowen, Morrow, Alarcon, Dunn, Murray, Sher,  
            Vasconcellos
          NOES:  Battin

           ASSEMBLY FLOOR  :  60-12, 5/20/02 - See last page for vote


           SUBJECT  :    Prepaid calling cards and services

           SOURCE  :     Author


           DIGEST  :    This bill 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 its 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.

           ANALYSIS  :    Existing law:

          1. Regulates the sale of prepaid telecommunications  
                                                           CONTINUED





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             (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 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) 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.

          This bill:

          1. Expands the list of specified fees and charges that  
             must be disclosed to include:  value of the card,  
             surcharges, taxes, periodic fees in addition to  
             monthly fees, maintenance fees, pay telephone  
             surcharges, the surcharges for periods of use in  
             addition to the first minute for calls within the  
             United States, and surcharges for international  
             calls or in lieu of disclosing each surcharge, the  
             highest surcharge for any international call  
             applicable on that card.

          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.








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          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,  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.  Requires the company to provide  
             customer service in each language used on a prepaid  
             calling card or its packaging and in the  
             advertising or promotion of the prepaid calling  
             card or prepaid calling services.

          6. Prohibits a company from imposing a fee or  
             surcharge related to obtaining customer service,  
             including any charge related to connecting with the  
             customer service number or waiting to speak to a  
             live operator.

          7. 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.

          8. Prohibits a company from imposing a fee or  
             surcharge that is not disclosed as required or that  
             exceeds the amount disclosed by the company.

          9. Prohibits a company from imposing any charge if the  
             consumer is not connected to the number called.   







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             Clarifies that the customer shall not be considered  
             connected if there is a busy signal or the call is  
             unanswered.

          10.Requires that the value of the card and the amount  
             of the various charges, however denominated, that  
             are required to be disclosed shall be expressed in  
             the same format.  If the value of a card is  
             expressed in minutes, the minutes shall be  
             identified as domestic or international and the  
             identification shall be printed on the same line or  
             next line as the value of the card in minutes.

          11.Provides that prepaid calling cards that are in  
             compliance with current disclosure requirements may  
             be sold to the public until July 1, 2003.

          12.Makes other clarifying or technical changes to the  
             law.

           Comments  

          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 users with sufficient time to  
          disconnect and avoid charges once they are told what  
          the charges will be.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  6/25/02) (unable to re-verify due to  
          time constraints)







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          California Attorney General
          Office of Ratepayer Advocates 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

           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 three cents to  
          50 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  







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          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.

           ASSEMBLY FLOOR  :
          AYES:  Aanestad, Alquist, Aroner, Bates, Briggs, Calderon,  
            John Campbell, Canciamilla, Cardenas, Cardoza, Chan,  
            Chavez, Chu, Corbett, Correa, Cox, Daucher, Diaz,  
            Dickerson, Dutra, Firebaugh, Florez, Frommer, Goldberg,  
            Harman, Havice, Jackson, Keeley, Kehoe, Kelley, Koretz,  
            Leach, Leslie, Liu, Longville, Lowenthal, Maddox,  
            Maldonado, Matthews, Migden, Nakano, Nation, Negrete  
            McLeod, Oropeza, Robert Pacheco, Papan, Pavley, Reyes,  
            Richman, Salinas, Simitian, Steinberg, Strickland,  
            Strom-Martin, Thomson, Vargas, Wayne, Wiggins, Wyland,  
            Wesson
          NOES:  Ashburn, Bogh, Bill Campbell, Cogdill,  
            Hollingsworth, Leonard, Mountjoy, Rod Pacheco, Pescetti,  
            Runner, Wyman, Zettel


          CP:sl  6/29/02   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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