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.