BILL ANALYSIS C.S.S.B. 1644 By: Henderson (Danburg) May 20, 1995 Committee Report (Substituted) BACKGROUND Current regulations by the Federal Communications Commission's for the changing of a consumer's long-distance carrier by an interexchange carrier apply only to changes generated by telemarketing and do not apply to written solicitations. Despite current safeguards, consumers continue to have their long-distance carriers changed without their permission. The techniques for changing the carriers include deceptive marketing in which consumers are induced to sign a form document that does not clearly advise the consumers that they are authorizing a change in their long-distance carrier. Letter of authorization forms may be disguised as contest entry forms, prize claim forms, solicitations for charitable contributions, or checks made payable to the consumer. All these marketing practices combine the inducement with the letter of authorization and the inducement language is prominently displayed on the inducement/letter of authorization form, while the long-distance carrier change language may not be. For example, inducement checks, which consumers must sign in order to cash, typically contain a statement near the signature line purporting to authorize a long-distance carrier. In addition, interexchange carriers are also using "negative option letter of authorization" forms. These forms offer prizes to consumers if they return the forms and may "require" consumers to check a box at the end of the form if they do not want to change their long-distance carrier. PURPOSE S.B. 1644 prohibits an interexchange carrier from initiating a primary long distance carrier change without a letter of agency from the subscriber; provides administrative penalties. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Title IIIG, Public Utility Regulatory Act of 1995, as enacted by S.B. 319, 74th Legislature, 1995 (PURA 1995), by adding Section 3.308, as follows: Sec. 3.308. CHANGE OF LONG DISTANCE CARRIER. (a) Requires a telecommunications provider to obtain from the subscriber a letter of agency that conforms to this section if the provider is required by the rules and regulations of the Federal Communications Commission to obtain a written authorization from a subscriber to initiate a primary long distance carrier change. Provides that a letter of agency that does not conform to this section is invalid. (b) Provides that a letter of agency is a document authorizing an interexchange carrier (carrier) to initiate a primary long distance carrier change. Requires the subscriber requesting the change to sign and date the letter. (c) Sets forth requirements for the form and content of the letter of agency. (d) Prohibits a letter of agency from purporting to instruct the subscriber to take an action to retain the subscriber's current carrier. (e) Prohibits a person from selling, providing, presenting, delivering or conveying a written letter of agency that does not conform to this section to a telecommunications provider . (f) Provides that a person commits an offense if the person knowingly and intentionally violates this section and such violation results in an unauthorized change in long distance carrier. An offense shall be subject to administrative penalties. SECTION 2. Effective date: September 1, 1995. Makes application of this Act prospective. SECTION 3. Emergency clause COMPARISON OF ORIGINAL TO SUBSTITUTE (1) SECTION 1 (Sec. 3.308(e)) is substituted. The new subsection prohibits a person from selling, providing, presenting, delivering or conveying a written letter of agency that does not conform to this section to a telecommunications provider. The original subsection stated that interexchange carriers were liable for violations committed by their employees or independant contractors acting on their behalf. (2) SECTION 1 (Sec. 3.308(f)) of the substitute states that an offense occurs if a person knowingly and intentionally violates the section. Also, the act must result in an unauthorized change of primary long distance carrier to be considered a offense. The original bill defined an offense as one knowingly violating the section. The penalty is changed from a 3rd degree felony for the first offense and a 1st degree felony for subsequent offenses. SUMMARY OF COMMITTEE ACTION The House Committee on State Affairs met in public hearing on May 8, 1995 to consider SB 1644. The chair laid out the bill and recognized Rep. Danburg to explain SB 1644. The following person testified for the bill: Chuck Meadows representing Silverleaf Financial Corportation. The following person provided neutral testimony on the bill: James Meadows representing himself. The chair left SB 1644 pending. SB 1644 was considered by the committee in a formal meeting on May 18, 1995. The chair laid out the bill. The committee considered a complete substitute for the bill. One amendment was offered to the substitute. The amendment was adopted without objection. The substitute as amended was adopted without objection. The chair directed the staff to incorporate the amendment into the substitute. The bill was reported favorably as substituted with the recommendation that it do pass and be printed, by the record vote of 13 ayes, 0 nay, 0 pnv, 2 absent.