Comments on proposed rules for jurisdiction in cross-border transactions

Consumer Measures Committee
c/o David Clarke
Office of Consumer Affairs
Industry Canada
Room 911A, CD Howe Bldg
235 Queen St.
Ottawa, Ont. K1A 0H5
Dear Mr. Clarke:
Comments on “The Determination of Jurisdiction in Cross-border Business-to-Consumer Transactions”
Thank you for the opportunity to comment on this important issue, as set out in the above-titled consultation paper. PIAC is a federally incorporated non-profit organization with members and clients from across the country. PIAC has been representing the residential consumer interest in marketplace issues for over 25 years. We have been particularly involved in consumer protection issues arising from the emerging online marketplace, both nationally and internationally. In particular, we have been actively involved, on behalf of Consumers International as well as ourselves, in the Hague Conference negotiations to complete an international Convention on Jurisdiction in cross-border commercial transactions.
PIAC’s position statement of February 2001 on the preliminary draft Hague Convention is attached, and is also posted on the PIAC website at http://www.piac.ca. Also attached is the Consumers International position statement on point.
We have reviewed the consultation paper and offer the following comments.

General

The proposed rules constitute an appropriate basis for a workable regime for determining applicable law and forum in cross-border litigation between consumers and businesses – one that strikes a fair balance between the interests of consumers and businesses. However, they fail to provide adequate certainty in the case of online merchants who take no steps to limit the jurisdictions in which they contract with consumers. Such certainty can and should be achieved through amendments that clearly place the onus on online businesses to take reasonable measures to limit the jurisdictions in which they conduct transactions, if they wish to limit their exposure to certain legal systems.

Underlying Principles

It is important that any rules regarding jurisdiction reflect the reality that consumers (both offline and online) suffer from tremendous information asymmetries and unequal bargaining power vis-à-vis sellers. It would be unrealistic and unfair, for example, to establish rules based on the presumption that ordinary consumers read, appreciate, and agree to contractual clauses specifying applicable forum and law in the case of disputes, every time they transact with businesses. In fact, consumers have no choice in the matter, as they are presented with non-negotiated “take it or leave it” terms of contract, drafted by the business in the business’s self-interest. For this reason, it is essential that rules be established to limit the ability of businesses to restrict by contract consumer rights to legal redress.
It is also important to recognize the asymmetries between consumers and businesses in terms of financial ability and incentive to pursue cross-border litigation. As repeat players, businesses have a strong incentive and financial interest in pursuing cross-border litigation with consumers in order to ensure favourable precedents, or to avoid unfavourable precedents. On the other hand, individual consumers rarely have the time, energy or financial resources to pursue litigation, even where they have a strong case and even where the dispute is within their own jurisdiction. If legal redress is to be made available to ordinary consumers in any practical sense, it must be available via their own courts. Similarly, if consumer protection laws are to be effective, they must be available to consumers who transact from within the jurisdiction in question.
Choice of forum and choice of law clauses in consumer contracts, which clauses have the effect of limiting the consumer’s right to redress, should never be enforceable. Like other “fine print” in standard form contracts, such clauses are invariably imposed on unwitting consumers. They are not the result of conscious negotiation between two relatively equal parties. The only “choice” involved in such clauses is that of the business. No one, least of all the business using such clauses, expects the ordinary consumer to address her mind to such clauses at the time of the transaction. No one should therefore expect consumers to be bound by such clauses.
Even where such a clause is brought to the attention of the consumer at the time of the transaction, it is unfair and unrealistic to expect the consumer to appreciate its implications. Choice of jurisdiction and law in the case of disputes cannot be considered a true choice by the consumer unless it is made after the dispute has materialized, when the consumer can fully understand and appreciate its implications.
Will adoption of the proposed rules as general principles provide guidance and greater legal certainty for online consumer transactions conducted within Canada?
It is unclear what is meant by “adoption of the proposed rules as general principles” (emphasis added). Certainly, adoption of these rules would provide some guidance and greater legal certainty for cross-border consumer transactions within Canada. Specifically, the rules regarding applicable law and forum would be clear in the case of offline transactions, and online transactions where the business either took reasonable steps to avoid transacting with consumers in a given jurisdiction, or actively sought to conclude transactions with consumers in the other jurisdiction.
However, the rules would not be clear in the case of online merchants who neither actively solicit business in the consumer’s jurisdiction, nor actively seek to avoid concluding transactions in the consumer’s jurisdiction. Most commercial websites currently fall into this category: they neither actively target specific jurisdictions, nor seek to avoid their geographic exposure. It is highly desirable, therefore, that the rules provide more clarity as to how such cross-border transactions with such online businesses would be treated.

Would the application of the rules work in the offline environment?

PIAC submits that these rules would work well in the offline environment, where the location of business solicitations can be more easily determined.
Would the rules assist in ensuring that transactions on the Internet are governed by consistent principles – leading to predictable results regardless of the jurisdiction in which a particular buyer or seller resides?
As noted above, the rules would apply in a relatively straightforward manner in cases where the business is either clearly targeting a given jurisdiction or clearly attempting to avoid dealing with a given jurisdiction. However, they would not provide clear guidance in the case of online businesses who neither clearly target nor seek to avoid their geographic exposure. As the majority of online businesses currently fall into this category, it would be preferable if the rules provided more guidance in such cases.
The proposed rules center around whether or not the company engaged in “a solicitation of business in the consumer’s jurisdiction”. Where the vendor “clearly demonstrates that it took reasonable steps to avoid concluding contracts with consumers resident in a particular jurisdiction, it is deemed not to have solicited business in that jurisdiction”. However, where the vender cannot so demonstrate, a determination must be made as to whether it solicited business in the consumer’s jurisdiction.
Assuming that the vendor conducts no advertising other than on its website, but makes its website available to anyone accessing the Internet, and concludes transactions with consumers from a given jurisdiction without making reasonable efforts not to do so, is the vendor “soliciting business” from consumers in that jurisdiction? In other words, does mere website advertising, combined with actual transactions where no reasonable effort is made to avoid such transactions, constitute “soliciting business” under these proposed rules?
In the international context, language and currency would no doubt be relevant factors in a determination of whether the website solicited business in the consumer’s jurisdiction. However, in the Canadian context, there is only one currency, and there are bilingual residents in all provinces. Therefore, neither of these factors would be helpful in determining how the rule would apply.
Any statements by the online vendor suggesting that it does business in the jurisdiction in question would clearly be relevant, but such statements may not exist.
The rules as currently drafted provide little guidance to businesses or consumers in such a scenario. Greater certainty would be achieved by defining the term “solicitation of business”, so as to clearly include the situation posited above (i.e., passive website advertising combined with failure to meet the “due diligence” test set out in s.2 of the choice of forum rules). Thus, the onus would be on businesses to “de-target”- i.e., to take reasonable steps to avoid transacting in those jurisdictions they wish to avoid.
Such an approach is consistent with the principles set out above (asymmetry of information, incentives, and bargaining power). It is also consistent with the rule as drafted, which establishes a “de-targeting” test as a due diligence defence for businesses.
It is important to note that online businesses can easily restrict their geographic exposure. Reasonable steps to avoid such exposure include:

• clear and conspicuous notices re: limits to geographic availability;
• a requirement that consumers select the jurisdiction from which they are contracting;
• the use of technological measures to block transactions with certain jurisdictions;
• refusal to send goods to addresses in certain jurisdictions; and
• refusal to deal with consumers whose address is in certain jurisdictions.

A consumer who intentionally or recklessly misrepresents her jurisdiction, in order to circumvent reasonable efforts by a business to limit its exposure, would not be able to benefit from the jurisdictional or applicable law provisions in these rules.

Suggested Revisions

For the above reasons, PIAC suggests that the proposed rule should include a definition of “solicitation of business” that includes all forms of advertising, including passive online advertising via websites.
Such a definition would clarify the rules for both businesses and consumers in the many situations where there is neither any clear “targeting” nor any clear “de-targeting”. It would reduce unnecessary and costly litigation, and would prevent the development of conflicting jurisprudence. It would place the onus on the party most able to bear such onus, by encouraging online businesses to decide which jurisdictions they are comfortable doing business in.
Businesses will no doubt argue against such a rule on the basis that it will reduce the benefits of B2C electronic commerce. Consumer groups, representing the primary intended beneficiaries of such commerce, have however consistently and unanimously taken the position that effective redress is more important to them than greater choice of products and services online. There is substantial choice in the online marketplace already; e-commerce even within a given jurisdiction has substantially increased the options available to consumers. Encouraging businesses to limit their geographic exposure to those jurisdictions in which they are comfortable being subject to consumer protection laws and courts is desirable, from the perspective of consumers.
In addition to the above issue, PIAC would like to mention two minor drafting issues. First, re: choice of forum rules, s.1(b) refers only to the vendor, and does not also specify a vendor’s agent (similar language exists in s.2(b) of the rules re: choice of law). Does the term “vendor” implicitly include agents of the vendor? If there is any doubt about this, the rule should specify “vendor or its agent”, such that the clause reads:
1. In circumstances where:
…..
(b) the consumer’s order was received by the vendor or its agent in the consumer’s jurisdiction; or…..
Second, s.4 of the proposed rules re: choice of forum adopts the language of the Brussels regulation, which is unfortunately unclear on a key point. Specifically, section 4(b) could be read to permit contracting out of the consumer’s right to access her own court system, when this is not the intention. This could be clarified by replacing the term “other than” with the term “in addition to”, so that the clause reads:
“4. The provisions of section 1 may be varied by agreement only if the agreement:
…(b) allows the consumer to bring proceedings in courts in addition to those provided for in section 1.”
Again, we appreciate the opportunity to comment on these proposed rules, and welcome any further consultation you may wish to undertake on this important issue.
Yours truly,
original signed
Philippa Lawson
Senior Counsel
 

PIAC application to CRTC for disclosure by telcos of long distance rates

Ms. Diane Rheaume
Secretary-General
Canadian Radio-Television and
Telecommunications Commission
Ottawa, ON
K1A 0N2
BY COURIER AND EMAIL
Dear Ms. Rheaume:
Re: Part VII Application by PIAC for enforcement of CRTC ruling regarding Basic Toll rate disclosure by ILECs,
1. The following is an application made pursuant to sections 24, 48, 51, 55, 56, 57 and 60 of the Telecommunications Act, and filed under Part VII of the CRTC Telecommunications Rules of Procedure, on behalf of residential subscribers of telephone services offered by incumbent telephone companies (ILECs). The application is for enforcement of the CRTC order requiring that basic toll service (“BTS”) rate schedules be made publicly available, and for the payment of costs to PIAC for its investigation and pursuit of this matter.
2. Specifically, we are requesting that the CRTC:

• make a declaration confirming that certain ILECs have been, and continue to be, in violation of its order in para.81(i) of Telecom Decision CRTC 97-19 to ”…make publicly available, rate schedules setting out the rates for basic toll service”;

• order ILECs to comply with the above-mentioned order, and to take the following specific measures in that respect:

1. post and maintain current BTS rate schedules on their websites, and in particular on the webpage for residential long distance services;
2. clearly present BTS rates as an option along with other toll plans, both on their websites and in other communications with residential customers;
3. clearly note in appropriate places and at appropriate times the time-of-day discounts and any minimum charges that apply to BTS rates, as well as the fact that further discounts apply for registered certified hearing or speech-impaired TDD users;
4. provide BTS rate schedules to consumers upon request (including by postal mail where the individual does not have Internet access or email);
5. where assisting consumers in identifying the appropriate toll plan given their calling patterns, ensure that those customers who may be best off under BTS rates are so advised;

(vi) take any other measures that the Commission considers appropriate in the circumstances.
3. order ILECs to rebate those customers who paid more for toll services under an ILEC “discount” toll plan than they would have under BTS rates, without prejudice to the exercise of any civil remedies that may be available to them; and
d) order the ILECs in question to pay PIAC its costs of investigating and pursuing this matter.

The facts

3. On 18 December 1997, the CRTC issued Telecom Decision 97-19, Forbearance – Regulation of Toll Services Provided by Incumbent Telephone Companies. In this decision, the Commission forbore from the regulation of ILEC toll and toll-free services, subject to certain conditions. One of the conditions was a ceiling on basic toll rates, with the corollary requirement that basic toll rate schedules shall be made “publicly available”.
4. Over the ensuing years, ILECs have offered an ever-changing array of discount toll plans to residential customers. These plans are advertised in the general media, by way of direct marketing, in bill inserts, and on the company websites. As well, many customers learn about their toll plan options primarily by speaking with company service representatives or listening to recorded information provided by the company’s customer service automated telephone system.

BTS rates vs. Discount Toll Plan rates

5. In addition to their “discount toll plans”, ILECs are required to offer toll service under regulated BTS rate schedules. Customers who are not subscribed to a discount toll plan are charged BTS rates, with applicable time-of-day discounts, for toll calls. Depending on the time of day and distance of the call, calls made under BTS rates can be less expensive than if made under a so-called “discount” plan. This has always been the case, such that some customers (e.g. those who only make short-haul toll calls during off-peak hours) have always been better off under BTS rates than under an ILEC “discount” toll plan.
6. Some discount toll plans involve a set monthly fee or minimum monthly charge; others do not. In late 2001, toll service providers began to levy a mandatory monthly $1.25 charge on their discount toll plans as a way of recovering high cost area subsidy funds from subscribers. With the exception of SaskTel, all of the major ILECs and competitors now levy a mandatory $1.25 monthly charge on their residential discount toll plans. Few discount toll plans promoted to residential customers do not now carry this fee. In early 2002, Bell Canada began to apply an additional minimum monthly charge of $4.95 for its popular First Rate plan.
7. The imposition of monthly fees and minimum charges for discount toll plans immediately increases the threshold of calling below which BTS rates make more economic sense for subscribers. In the absence of such charges, there may have been relatively few customers for whom BTS made more sense than a discount toll plan. Once mandatory monthly fees are added to discount plans, however, BTS rates become the best option for many more customers.
8. For example, a Bell customer who spends less than $6.20 per month on toll calling under BTS rates will now be better off under BTS rates than under Bell’s First Rate plan. This is because Bell’s First Rate plan now involves a minimum monthly payment of $6.20, even if no toll calls are made. From another perspective, a Bell customer calling from Ottawa to Toronto during off-peak hours, and making no other toll calls, would have to spend more than 36 minutes/mo. on such calls in order to realize any savings under Bell’s First Rate plan over BTS rates.

Customer calling patterns

9. According to data provided by Bell Canada during the recent Price Cap Review proceeding, 7.4% of Bell’s customer accounts used no long distance at all during the period January to June 2001, 25% used less than 7.5 minutes of toll calling per month, and the median customer (50th percentile) used 42.5 minutes per month.
10. TELUS provided similar data for the same period, as follows: 17.56% of customer accounts used no long distance at all; 25% used less than 4.75 minutes/mo., and 50% used less than 50.7 minutes/mo.
11. Based on this data, it would appear that a significant proportion of Bell and TELUS customers are better off under BTS rates than under discount toll plans. Yet, according to Bell in October 2001, “less than 5% of its residential customers make toll calls in a typical month yet are not signed up for a toll plan with either the Company or a competitor”.

Failure to Disclose BTS Rate Schedules

12. In June 2002, PIAC began researching long distance rates for its ten year review of competition and deregulation in the telephone industry. One of the many items researched was ILEC basic toll rates. This information is not provided in telephone directories. During the month of June, PIAC’s researcher, Michael Nesbitt, searched company websites and made numerous telephone calls to ILEC regulatory departments and customer service in order to obtain BTS rate schedules. Details of the results of his attempts to obtain this information are set out in his Affidavit of July 3rd, 2002, attached.
13. In summary, no company provided BTS rate schedules to us upon request to customer service (requests were made by both telephone and email). In no case other than Bell Canada were we able to find the BTS schedules on the company website. Bell had only recently posted this information on its website in May 2002, and only after persistent demands by a consumer advocate that the basic toll rate information be posted – see the attached Affidavit of Jean Sebastien. Even some regulatory departments had difficulty responding to our request for basic toll rate schedules, as the Supplementary Affidavit of Michael Nesbitt sets out.
14. During a meeting of the CRTC “BMT Committee” on June 17th, 2002, regulatory staff from each major ILEC were informed by PIAC counsel of this problem, and were notified that action would be taken if it was not resolved.
15. By late August, 2002, most of the ILECs in question still did not make their BTS rate schedules available upon request, and most still did not have this information posted on their websites. See the Supplementary Affidavit of Michael Nesbitt.
16. Of the three companies that now make this information available on their websites, only TELUS’s posting discloses the BTS rates as a toll option. Under the heading “Non-Plan Rates”, the service is described as: “Rates for calls that are operator-assisted or not under a TELUS Long Distance plan”. SaskTel’s BTS rate schedules are located on an obscure page of its website (“About SaskTel – Public Policy – Non-Tariffed Services”) and are not mentioned on the page listing long distance options. Bell Canada’s web posting of “base rate schedules” is presented in a manner and location that is unlikely to be noticed by consumers seeking to understand their toll options with Bell Canada. See the Supplementary Affidavit of Michael Nesbitt.
17. In addition, when low volume toll users inquire by telephone about the most appropriate toll option given their calling profile, research conducted by PIAC suggests that ILECs almost always direct them to discount toll plans, even when the customer may be better off under BTS rates. This was the case in both June and August 2002. See the Affidavit and the Supplementary Affidavit of Michael Nesbitt.

The Law

18. As noted above, basic toll rates continue to be subject to CRTC regulation. In Telecom Decision 97-19, Bell Canada, Aliant, MTS, TELUS, Sogetel, Telus(Quebec), and Telebec were ordered to “make publicly available, rate schedules setting out the rates for basic toll service”. By way of Telecom Decision 2000-150, SaskTel was made subject to the same requirement. This disclosure requirement was imposed by the Commission as a condition of toll forbearance under s.24 of the Telecommunications Act.
19. A contravention of condition referred to in section 24 is considered an offence under s.73(2)(a) of the Telecommunications Act and is punishable upon summary conviction with fines of up to $100,000 per day on which the offence is committed, for a first offence.
20. The CRTC has the powers of a superior court with respect to the enforcement of its decisions. Using this power in past cases of regulatory violations, the Commission has required companies to undergo independent audits, to file reports with the CRTC, to revise procedures, and to compensate affected customers.
21. The CRTC also has the power to order “by whom and to whom any costs are to be paid and by whom they are to be taxed….”.
22. Subscribers who have incurred unnecessary charges as a result of ILEC acts or omissions that are contrary to a CRTC decision may, subject to applicable limitations of liability, sue for and recover their damages in court.
Argument

Making BTS rate information available

23. It is clear that all major ILECs have been violating the 1997 CRTC order to make publicly available their basic toll rate schedules. Until very recently, none of the major ILECs were making this information publicly available. Only in response to pressure from consumer advocates have some companies begun now, some 4½ years after the original order, to make this information available.
24. In June, 2002, none of the major ILECs provided BTS rate schedule information to consumers upon request by telephone or email. Two months after PIAC’s notification that they were in breach of a CRTC requirement by not providing this information, most companies still do not provide BTS rate schedules to consumers upon request.
25. Only in response to persistent demands from consumer advocates did some companies (Bell, TELUS) post this information on relevant pages of their websites in the spring and summer of 2002. As of the date of this application, Bell Canada’s website posting of BTS rate schedules remains neither noticeable nor clear (although Bell has, since August 21st, removed the option “Help me pick a long distance plan”, as well as the text entitled “Bell First Rate Long Distance Plans” that specifically directed users to its discount plans). BTS rate schedules (other than for overseas rates) are still not available on the Aliant company or MTS websites. SaskTel’s BTS rate schedules continue to be posted on an obscure page of the company website that even researchers have difficulty finding.
26. Even some ILEC regulatory departments had difficulty providing BTS rate schedules to PIAC upon request. For example, it took PIAC’s researcher several days to obtain this information from the regulatory departments of TELUS and MTS (see Supplementary Affidavit of Michael Nesbitt).
27. In light of the situation described above, all ILECs should be ordered to post BTS rate schedules on their websites, in a clear and conspicuous manner.
28. Posting on websites is an appropriate method of disclosure, but it is not sufficient. Many individuals for whom this information is relevant do not have access to the Internet. ILECs should be therefore be required not only to post their BTS rate schedules on websites, but also to provide BTS rate schedules to consumers upon request by fax and postal mail.

Disclosing BTS as a toll plan option

29. It is not enough that ILECs merely provide BTS rate schedules to consumers upon request. Most consumers will not be aware of the BTS rate option in the first place, and will therefore not seek this information unless they are informed of its existence. The onus must therefore be on ILECs to present the BTS option alongside all other toll options that they make available to customers.
30. Mere posting of BTS rate schedules on a company website is insufficient insofar as it does not clearly communicate to online consumers the fact that BTS rates are an alternative to other toll plans, and the advantages of BTS rates over other options. There is little value in a website posting that is either inconspicuous or insufficiently informative. BTS rate schedules should be posted in a context and manner that makes the BTS option obvious to the online consumer seeking information on their toll options, and that clearly identifies relevant aspects of the BTS rate option in relation to other toll options (e.g., time-of-day discounts, no monthly fee). Otherwise, online consumers will not be fully informed when making decisions among the toll options available to them.
31. Nor is it sufficient that disclosure of this option is made on the company website, since many customers do not have Internet access or do not use it for this purpose. The BTS rate option should be disclosed alongside other toll options in all modes of advertising or customer communications: on websites, in print advertising, in email communications, and during telephone and in-person communications with customers.
32. The evidence further shows that many ILECs fail to inform customers of the BTS rate option, even when it is clear that the customer would be best off with this option. Consumers are repeatedly directed, both online and offline, to so-called “discount” toll plans even when they would be better off under BTS rates. For example, Bell Canada’s web-based service that purported to identify the best Bell toll plan given the user’s calling patterns did not even include BTS rates as an option.
33. Thus, not only are ILECs misleading consumers through their failure to disclose BTS rates, some are explicitly misrepresenting what the consumer’s best toll option is.
34. ILECs should therefore be required, when directing consumers to the best toll plan based on the consumer’s calling patterns, to advise those customers who may be best off under BTS rates that this is the case.

The violation has benefited ILECs at the expense of consumers

35. The regulatory violation exposed in this application has had significant consequences for ILEC subscribers. ILEC failure to disclose basic toll rate schedules, indeed the existence of a basic toll rate option, has created a situation in which many customers have paid, and continue to pay, more than they would otherwise for long distance service. By effectively concealing this information from consumers, ILECs have benefited financially, at the expense of low volume toll users who were not informed of the basic toll rate option.
36. Data available to PIAC on subscriber toll calling patters suggests that as many as 30-40% of ILEC customers could have been adversely affected by this violation. The extent of damages incurred by subscribers as a result of this failure to disclose is thus not yet clear.
37. ILECs were notified of this problem in June 2002 (and in Bell’s case, as early as April 2002). Yet, non-compliance continued to be the norm as of late August, 2002. It therefore appears that non-compliance is due not merely to ordinary negligence, but to conscious corporate strategy.
38. Clearly, there needs to be a greater regulatory incentive for ILECs to comply with CRTC orders regarding disclosure of information, where such disclosure is contrary to their financial interests. In particular, the cost of non-compliance must outweigh the cost of compliance.
39. As well, greater specificity of the disclosure requirement is needed in order to ensure that the objective of disclosure is met. ILEC responses to the CRTC’s 1997 order, and to subsequent requests from consumer advocates, suggest that the term “make publicly available” is insufficiently clear and specific to counter the strong ILEC incentive not to inform consumers of this option. If the Commission wishes to ensure that consumers are informed of the basic toll rate option, it must provide more specific guidance to the ILECs on what constitutes adequate disclosure of this information.
40. PIAC encourages the Commission to exercise the full scope of its enforcement powers in respect of this long-standing violation, so as to ensure meaningful compliance with this and other similar consumer safeguards, now and in the future.
41. Any CRTC order should explicitly leave open the exercise by aggrieved customers of their rights under s. 72 of the Telecommunications Act.

PIAC Costs

42. This application for enforcement and relief has been necessitated by the ILECs’ ongoing negligence and/or intentional disregard of regulatory requirements. PIAC’s investigation and pursuit of this issue has required a significant amount of time. It is appropriate that the ILECs pay PIAC’s costs of bringing this application.

Order Requested

43. PIAC therefore requests that the CRTC:

1. make a declaration confirming that certain ILECs have been, and continue to be, in violation of its order in para.81(i) of Telecom Decision CRTC 97-19 to ”…make publicly available, rate schedules setting out the rates for basic toll service”;
2. order ILECs to comply with the above-mentioned order, and to take the following specific measures in that respect:
   • post and maintain current BTS rate schedules on their websites, and in particular on the webpage for residential long distance services;
   • clearly present BTS rates as an option along with other toll plans, both on their websites and in other communications with residential customers;
   • clearly note in appropriate places and at appropriate times that no minimum charges apply under BTS rates, that time-of-day discounts do apply, and that further discounts apply for registered certified hearing or speech-impaired TDD users;
   • provide BTS rate schedules to consumers upon request (including by postal mail where the individual does not have Internet access or email);
   • where assisting consumers in identifying the appropriate toll plan given their calling patterns, ensure that those customers who may be best off under BTS rates are so advised;

vi) take any other measures that the Commission considers appropriate in the circumstances.
3. order ILECs to rebate those customers who paid more for toll services under an ILEC “discount” toll plan than they would have under BTS rates, by the difference between what they actually paid and what they would have paid under BTS rates, without prejudice to the exercise of any civil remedies that may be available to them; and
d) order the ILECs in question to pay PIAC its costs of investigating and pursuing this matter.
All of which is respectfully submitted,
Philippa Lawson
Senior Counsel
Public Interest Advocacy Centre
Attach.
cc: Bell Canada, Aliant, TELUS, MTS, SaskTel (by courier and email)
NWTel, Independent ILECs, Interested Parties PN 2001-37 (by email only)

NOTICE

TAKE NOTICE that pursuant to subsections 8(1) and 59(1) of the CRTC Telecommunications Rules of Procedure, the respondents are required to mail or deliver their answers to this application to the Secretary General of the Canadian Radio-television and Telecommunications Commission, Ottawa, Ontario, K1A 0N2, and to serve a copy of the answer on the above by 30 September 2002.
Service of the respondent’s answers on the applicant may be effected by personal delivery, e-mail or by facsimile, at the address set out above.
If the respondent does not file or serve its answer within the time limit prescribed, this application may be disposed of without further notice to it.
END OF DOCUMENT
 
Link to telco submissions

Bell overcharging for party-line rental phone sets

Ms. Diane Rheaume
Secretary-General
Canadian Radio-Television and
Telecommunications Commission
Ottawa, ON
K1A 0N2
BY FAX AND EMAIL
Dear Ms. Rheaume:
Re: Bell Canada – unauthorized rate increases to party line rental sets;
Part VII Application by PIAC for enforcement and relief
1. The following is an application made pursuant to sections 25, 48, 51, 55, 56, 57 and 60 of the Telecommunications Act, and filed under Part VII of the CRTC Telecommunications Rules of Procedure on behalf of Bell Canada’s residential party-line customers. The application is for enforcement of Bell Canada’s tariffed rate for party-line rental sets, compensation to overcharged subscribers, further enforcement measures designed to ensure compliance with CRTC tariffs in the future, and payment of costs to PIAC for its investigation and pursuit of this matter.
2. Specifically, we are requesting that the CRTC:

1. confirm that Bell Canada increased the monthly charge for party-line rental sets above the tariffed rate without CRTC approval, and did so on more than one occasion;
2. order Bell Canada to rebate affected customers all amounts improperly charged, with interest;
3. order Bell Canada to pay PIAC’s costs of investigating and pursuing this matter
4. grant any further relief as the Commission considers reasonable.

3. PIAC also requests that the CRTC determine whether any other telephone companies have been overcharging for party-line rental sets, and if it is found that they have, make an order similar to that for Bell Canada, designed to ensure ongoing compliance in the future.

The Facts

4. In March 2002, PIAC was contacted by a Bell Canada two-party-line subscriber complaining about new and increased charges on her March 2002 telephone bill. One of the charges in question was $5.30 for “equipment rentals”. Upon investigation, it was confirmed that this charge related to an old 500-type rotary dial telephone set, and that the customer had no choice but to rent her telephone set from Bell Canada because she was a party-line subscriber. In response to an inquiry about the validity of the $5.30 charge for set rental, Bell Canada’s customer service representative confirmed that $5.30 was the correct charge for the rental set in question, and that the charge had recently been increased.
5. In June 2002, PIAC began researching Bell Canada’s telephone service options and prices as part of a study into how residential customers have been affected by competition and deregulation over the past ten years. One of the services examined was rental set prices. The Bell Canada tariff for rental sets, Item 2300 in Bell’s General Tariff, gives a rate of $2.95 for 500-type telephone sets provided to party-line subscribers. This tariff has an effective date of 1996 02 01, and there is no indication that it has been changed since that date.
6. Noticing the discrepancy between the confirmed $5.30 charge and the $2.95 tariffed rate, PIAC staff began investigating. Over the course of several weeks from June to August 2002, PIAC made numerous inquiries to Bell Canada’s regulatory department, customer service line (310-BELL), and Executive Office (1-800-267-7734) in an attempt to resolve this issue. As set out in the attached Affidavit of Michael Nesbitt, Bell representatives gave conflicting responses to the question of what is the applicable rate for party-line rental sets.
7. Finally, on August 7th, Bell confirmed that the approved rate is $2.95 and that the specific account-holder noted above had been improperly charged. A Bell service representative further confirmed that the improper rate increases had been applied across the board, such that this particular account holder was not unique in being overcharged.
8. Bell indicated that the specific account-holder would be credited with the improperly billed amounts, but did not confirm that all other similarly affected customers would be rebated.

The Law

9. Under sub-section 25(a) of the Telecommunications Act,
No Canadian carrier shall provide a telecommunications service except in accordance with a tariff filed with an approved by the Commission that specifies the rate or the maximum or minimum rate, or both, to be charged for the service.
10. While the price of terminal sets is generally no longer regulated, an exception exists for terminal sets rented by party-line subscribers. This is because party-line subscribers have no choice but to rent telephone sets from their service provider. As stated by the Commission in Telecom Decision CRTC 94-19,
The above findings and determinations [deregulating the sale, lease and maintenance of terminal equipment] do not apply to terminal equipment supplied on a monopoly basis, specifically, to equipment required by tariff to be supplied by the telephone company in conjunction with the provision of two-party, four-party or multi-party primary exchange services.
11. The approved tariffed rate for 500-type terminal sets rented by Bell’s party-line customers is $2.95. Bell Canada is not permitted to charge higher than this amount for rental telephone sets on party-lines. By doing so, Bell is in violation of s.25 of the Telecommunications Act.
12. A contravention of section 25 is considered an offence under s.73(2)(a) of the Telecommunications Act and is punishable upon summary conviction with fines of up to $100,000 per day on which the offence is committed, for a first offence.
13. Article 19 of Bell’s Terms of Service addresses Bell’s liability for charges that should not have been billed and those that were overbilled. It states:
19.1 In the case of a recurring charge that should not
have been billed or that was overbilled, a customer must be credited with the excess back to the date of the error, subject to applicable limitation periods provided by law. However, a customer who does not dispute the charge within one year of the date of an itemized statement which shows that charge correctly, loses the right to have the excess credited for the period prior to that statement.
19.2 Non-recurring charges that should not have been
billed or that were overbilled must be credited, provided that the customer disputes them within 150 days of the date of the bill.
19.3 A customer who is credited with any amount that
should not have been billed or that was overbilled must also be credited with interest on that amount at the rate payable for interest on deposits that applied during the period in question.
14. The CRTC has the powers of a superior court with respect to the enforcement of its decisions.
15. The CRTC also has the power to order “by whom and to whom any costs are to be paid and by whom they are to be taxed….”.

Argument

16. It is clear that Bell Canada has been charging higher than the approved rate for party-line rental sets for some time, in contravention of s.25 of the Telecommunications Act. Indeed, Bell appears to have increased its rate for this tariffed service without CRTC approval on at least two occasions.
17. Moreover, consumer advocates and at least one affected customer challenging the validity of the $5.30 rate were wrongly assured by Bell, as early as March 2002, that the $5.30 rate was valid.
18. This is not simply a case of human error resulting in overcharging, where the overcharging is rectified as soon as it is brought to the attention of the Company. On the contrary, Company representatives continued to defend the invalid charges when queried about them. Only after persistent investigation by the Public Interest Advocacy Centre did the Company finally admit its error and offer to refund the customer who had complained to PIAC.
19. It is unreasonable to expect ordinary customers to challenge Bell Canada’s assurance that a given rate increase has been approved. It is furthermore unreasonable to expect ordinary customers to research CRTC tariffs (that even Bell service representatives cannot find) in order to second-guess the company on its own ground. When a company is first questioned about an improper charge, the error should be immediately identified and rectified, by way of refunding all affected customers forthwith.
20. However, there is no indication that Bell Canada intends to refund all affected customers. Indeed, Article 19 of Bell’s Terms of Service puts the onus on customers to dispute overbilled charges; Bell need not refund overbilled amounts unless they are disputed by the customer. Article 19 furthermore removes the customer’s right to a refund one year after a statement on which the correct billed amount appears.
21. Such limits on Bell liability for overcharged amounts are clearly inappropriate when there is no reasonable way for a customer to determine that he or she has been overcharged, and when the company itself asserts that the charge is legitimate.
22. This instance of overcharging was only uncovered by a serendipitous confluence of events: the fact that the same person supervising research on telephone rates had received a few months earlier an inquiry about an account on which the impugned charge appeared. In other words, the ongoing overcharging would likely have never been appreciated by Bell customers or consumer advocates in the absence of this unusual confluence of information flowing to PIAC.
23. It is important that such persistent violation of CRTC regulations be effectively deterred. Mere reimbursement of the amounts improperly billed to those customers who complain, as required by Article 19 of Bell’s Terms of Service, will provide no incentive for Bell Canada and other regulated companies to comply with CRTC tariffs. Indeed, it would send the opposite message: that regulated companies can violate their tariffs with impunity.
24. In many instances, tariff violations may never be caught, especially where the company’s customer service representatives are not provided with the tools or training to accurately confirm tariffed rates (as was the case here).
25. If a company is caught violating a tariff, the opportunity to reimburse affected customers can be used to the company’s advantage, as the company contacts affected customers, apologizes, takes credit for noticing the error, and offers to reimburse and otherwise satisfy the customer. Mere reimbursement is clearly an insufficient incentive for ongoing compliance with tariffed rates.
26. Using its powers of enforcement (those of a superior court), the Commission should therefore require Bell Canada to take further measures, above and beyond reimbursement of the overcharged amounts, so as to effectively deter such violations in the future.
27. The only effective deterrence measure is one that more than offsets any financial advantage from non-compliance (i.e., makes compliance less expensive than non-compliance).
28. Clearly, Bell Canada needs to take more effective measures (a) to ensure ongoing compliance with CRTC tariffs, and (b) to ensure that its customer service representatives can quickly and accurately answer straightforward questions about current tariffed services.
29. While Article 19 of Bell’s Terms of Service requires a refund, with interest, of amounts overcharged, it does not limit Bell’s liability in the case of negligence. Article 16 does limit Bell’s liability for negligence, to “the greater of $20 or three times the amounts refunded or cancelled in accordance with Articles 13.1 and 15.1, as applicable”. However, Article 1.2 state that Bell’s liability is not limited “in cases of deliberate fault or gross negligence”.
30. Nor do the Terms of Service limit the CRTC’s powers of enforcement, which are those of a superior court. In past cases of regulatory breaches, the Commission has exercised this power in a variety of ways, including requirements for companies to undergo independent audits, to file reports with the CRTC, to revise procedures, and to further compensate affected customers.
31. Given the facts of this case, which show not an isolated incident involving only one Bell staff member, but rather a general lack of awareness by Bell personnel of basic tariffs, as well as a failure to distinguish between regulated and unregulated services, remedial orders above and beyond mere reimbursement are warranted. The Commission should therefore order Bell to:

1. further compensate affected customers for the improper charges by way of an additional credit to their accounts of an amount equal to the rebate;
2. post security for use in any future instances of non-compliance with CRTC tariffs;
3. undergo an audit of its regulatory compliance by an independent third party, the results of which are to be made public; and/or
4. file a semi-annual compliance report, including a personal declaration from its Chief Executive Officer confirming that the company is in compliance with all CRTC orders, tariffs and other regulations relating to residential telephone service, and documenting any instances of non-compliance.

Costs Argument

32. As indicated above, and in Exhibit A, this tariff violation would not have been uncovered and acted upon but for PIAC’s persistent investigation. It is only fair that Bell Canada reimburse PIAC for the costs of its investigation and pursuit of this matter.

Order Requested

33. For all these reasons, PIAC requests that the Commission make an Order:
a) requiring that Bell Canada rebate affected customers all amounts improperly charged, with interest;
b) requiring that Bell Canada take further remedial action such as:
i). further compensating affected customers for the improper charges by way of an additional credit to their accounts of an amount at least equal to the rebate;
ii) posting security for use in any future instances of non-compliance with CRTC tariffs;
iii)undergoing an audit of its regulatory compliance by an independent third party, the results of which should be provided to interested parties; and/or
iv) filing a semi-annual compliance report, including a personal declaration from its Chief Executive Officer confirming that the company is in compliance with all CRTC orders, tariffs and other regulations relating to residential telephone service, and documenting any instances of non-compliance; and
c) requiring that Bell Canada pay PIAC’s costs of investigating and pursuing this issue.
All of which is respectfully submitted,
original signed
Philippa Lawson
Senior Counsel
Public Interest Advocacy Centre
Attach.
cc: Bell Canada – Legal Department
CRTC – Legal Department

NOTICE

TAKE NOTICE that pursuant to subsections 8(1) and 59(1) of the CRTC Telecommunications Rules of Procedure, the respondents are required to mail or deliver their answers to this application to the Secretary General of the Canadian Radio-television and Telecommunications Commission, Ottawa, Ontario, K1A 0N2, and to serve a copy of the answer on the above by 16 September 2002.
Service of the respondent’s answers on the applicant may be effected by personal delivery, e-mail or by facsimile, at the address set out above.
If the respondent does not file or serve its answer within the time limit prescribed, this application may be disposed of without further notice to it.
END OF DOCUMENT

A Comparative Analysis of Residential Telephone Service: 1992-2002 – Press Release

The full report is available in PDF [pdf file: 0.44mb]

A Comparative Analysis of Residential Telephone Service: 1992-2002

While competition has brought welcome changes in choice, service innovation, and reductions in the price of long distance service, it has also brought higher overall telephone prices for the typical Canadian residential customer, a deterioration of service quality and a number of new marketplace problems. These are the key findings of a study released today by the Public Industry Advocacy Centre, a national non-profit organization that provides legal and research services on behalf of consumer interests concerning the provision of important public services. The report, authored by Andrew Briggs and Philippa Lawson, is the result of a yearlong study, conducted with the assistance of Industry Canada.

• Significant increases in prices in basic local service took place between 1992 and 2002. Some of the increases were due to the CRTC approved “rate rebalancing” plan under which local rate increases effectively funded long distance rate reductions. Others were due to rate applications, extension of local calling areas, mandatory surcharges, directory assistance, and connection installation and maintenance fees.

• While heavy usage customers reduced telephony costs by 15-30%, light users (some 25% of local service customers of Bell, MTS, Sasktel, Telus, and Aliant telephone companies) had substantial increases in their bills over the 10-year period of 35-65%. The typical medium use telephone user also was subject to increased telephone costs up to 33% in the referenced period.

• While the Statistic Canada index for telephone services for the entire sector rose at slightly less than inflation, telephone company productivity, largely because of advances in digital technology, was 5 times the rate in the economy. If telephone rates had tracked actual telco costs, bills would likely have been much lower.

An electronic copy of the report is available on request. A hard copy is available at a cost of $15.00
For further information contact Michael Janigan 613 562-4002 ex 26, mjanigan@piac.ca
NOUVEAU RAPPORT

Analyse comparative des services téléphoniques offerts aux particuliers : de 1992 à 2002

Même si la concurrence offre certains avantages, comme un choix plus large, de nouveaux services et des réductions des frais d’appel interurbains, elle est aussi à l’origine de la hausse des frais d’appel en général pour le consommateur canadien moyen, de la détérioration de la qualité des services et de nouveaux problèmes. Telles sont les principales conclusions d’une étude publiée aujourd’hui par le Centre de la défense de l’intérêt public, organisme national à but non lucratif qui offre des services juridiques et de recherche dans l’intérêt des consommateurs en ce qui concerne la prestation d’importants services publics. Le rapport, rédigé par Andrew Briggs et Philippa Lawson, est le résultat d’un an de recherches et de collaboration avec Industrie Canada.

Faits saillants

• Les frais d’appel pour le service local de base ont augmenté de façon significative entre 1992 et 2002. Certaines de ces hausses sont dues au « rééquilibrage des tarifs », projet approuvé par le CRTC en vertu duquel l’augmentation des tarifs des communications locales subventionnait effectivement la réduction des tarifs des appels interurbains. Les autres augmentations se justifient par la mise en place de nouveaux tarifs, l’élargissement de la zone d’appel locale, les nouveaux frais additionnels obligatoires, les frais pour l’Assistance-annuaire, le branchement et les frais d’entretien.

• Tandis que les consommateurs qui font fréquemment des appels ont vu leur facture de téléphone diminuer de 15 à 30 %, les clients qui font rarement des appels (environ 25 % des clients de Bell, MTS, Sasktel, Telus et Aliant) accusent une augmentation de 35 % à 65 % sur dix ans. Les consommateurs se situant entre ces deux catégories (c.-à-d., nombre d’appels moyen) subissent également une augmentation allant jusqu’à 33 % durant cette même période.

• Alors que l’index de Statistique Canada pour les services téléphoniques a subi une hausse légèrement inférieure au taux d’inflation, le taux de croissance de la productivité des compagnies de téléphone a été cinq fois supérieur à la croissance globale à long terme de la productivité totale des facteurs, et ce, grâce à l’informatique. Il est probable que les frais des services téléphoniques auraient été largement inférieurs durant cette période s’ils reflétaient les coûts véritables.

Vous pouvez obtenir une copie électronique du rapport pour une somme de 15 $. N’hésitez pas à nous contacter pour en faire la demande.
Pour de plus amples renseignements, veuillez contacter Michael Janigan par téléphone au (613) 562-4002 poste 26 ou par courriel : mjanigan@piac.ca

A Comparative Analysis of Residential Telephone Service: 1992-2002 – Executive Summary

The full report is available in PDF [pdf file: 0.44mb]
 

Executive Summary

The historic decision of the Canadian Radio-Television Commission (CRTC) in 1992 (Telecom Decision CRTC 92-12)¹ to allow competition in the provision of long distance services between the incumbent monopoly telephone companies (ILECs) and new entrant providers provoked more than a contest for customers. The 1992 decision, together with subsequent CRTC implementation decisions, set up the framework for the delivery of competitive telecommunications services extending to the provision of local exchange service by non-incumbent carriers. The restructuring of the regulation of the telephony provoked and continues to provoke debate as to the winners and losers in the new world created by competition based decisions.
This study examines the impact of the restructuring changes in the delivery of residential wireline services on residential consumers. It attempts to do so using measurements that are factual and meaningful to the actual usage of residential consumers. The report relies on information in large part collected from a variety of referenced and publicly available sources for the period 1992-2002.
The report notes the significant increases in prices for basic local service that occurred between 1992 and 2002. Some of these increases were attributable to a CRTC-approved “rate rebalancing” plan under which local rate increases effectively funded long distance rate reductions. Other increases were due to ILEC revenue requirement applications, extension of local calling areas, new mandatory surcharges for 911 and Message Relay Service, and revenue based contribution charges to fund high cost serving areas. New or increased charges for directory assistance, connection installation, and maintenance fees were also implemented during this period. As well, consumers saw the prices for optional features such as voice mail, call display, and call waiting increase over the same period.
The report reviews the changes in long distance calling plans available to residential customers, noting a significant increase in the variety of options, as well as in the discounts available. However, the addition of a monthly “Network Service Charge” by the telephone companies applicable to most long distance calling plans has significantly compromised savings to low and medium use long distance consumers.
Given the presence of both price benefits and price burdens delivered by competition, it is important to arrive at a bottom line. To assess the overall impacts of the changes in prices for telephone services, the report uses five customer usage profiles based on telephone company data. Representative customer profiles, based on recent calling data, are priced out at 1992 and 2002 prices. Not surprisingly, heavy usage consumers were the biggest winners; showing reduced telephony costs of between 15-30%. On the other hand, light users of telephone services, (some 25% of ILEC customers) received substantial increases in telephone bills over the ten year period of between 35%-65%.
The median, or medium use, customer was also generally subject to increased telephone costs, ranging from –4% to +33%.
Statistics Canada also tracks consumer price changes in the telephone services sector, using a representative basket of services. Over the period, January 1992 to June 2002, the Statistics Canada price index for telephone services rose 17.4%. While this data shows that telephone service costs across the board have generally increased at slightly less than the rate of inflation, it is important to note that period in question was one in which the telephone companies experienced significant productivity growth. Improvements in productivity came about primarily as a result of the installation of computer based technology, such as digital switches, that greatly reduced telephone company costs. For example, Bell Canada’s productivity growth rate over the period 1988-2002 was 5 times the long run economy-wide TFP growth. It is therefore likely that telephone service prices would have been much lower during this period had they tracked actual costs.
The report also notes the deterioration in customer service that appears to have accompanied the development of competition over this ten-year period. Telephone companies seem to be focused more on capturing customers than on servicing them, once captured.
As well, while competition has greatly expanded customer choice, new problems have arisen. The frequent changes in plans and options make it difficult for customers to compare services and prices to ensure the best deal. Unwanted and misleading marketing is a persistent problem. Customers are far too frequently not given accurate information about charges and costs associated with service plans. While the frequency of occurrence has diminished in magnitude, the switching of service providers without the consumer’s permission (“slamming”) remains a marketplace problem.
While availability of basic local service did not suffer over this period, competition in the provision of local residential service was very slow to develop. As of 2002, most residential communities in Canada did not have wireline options to ILEC local service. Only a few providers were offering alternative wirelines services, and only in a few locations. The report concludes that while competition has brought welcome changes in choice, service innovation, and reductions in the price of long distance service, it has also brought higher overall telephone prices for most residential customers, a deterioration in service quality, and a number of new marketplace problems for consumers.
1 Telecom Decision CRTC 92-12

RÉSUMÉ

En 1992, la décision du Conseil de la radiodiffusion et des télécommunications canadiennes (CRTC) marqua d’une pierre blanche l’histoire des télécommunications. Connue sous le nom de Décision 92-12¹, elle autorisa la concurrence dans le secteur des services de télécommunications interurbaines entre les entreprises de services locaux titulaires qui en avaient le monopole (ESLT) et les nouveaux fournisseurs. Cette décision suscita un véritable tollé chez les clients. La décision de 1992 suivie de la mise en œuvre des mesures adoptées par le CRTC créa un environnement propice à la concurrence en matière de services de télécommunications en autorisant les fournisseurs non titulaires à offrir des services locaux. La révision de la Loi sur les télécommunications provoqua à l’époque et continue de provoquer aujourd’hui de vives discussions quant aux gagnants et aux perdants de ce nouvel environnement dorénavant régi par des décisions axées sur la concurrence.
Ce rapport étudie les conséquences sur les particuliers de la restructuration relative à la prestation des services de branchement résidentiel. Ce rapport tente d’évaluer ces répercussions en utilisant des données factuelles et représentatives des habitudes téléphoniques des particuliers. Le présent rapport repose sur des données provenant, en grande partie, d’ouvrages de référence divers et de sources mises à la disposition du public sur une période située entre 1992 et 2002.
Le rapport fait état des hausses importantes des frais d’appel pour le service local de base qui ont eu lieu entre 1992 et 2002. On attribua certaines de ces augmentations au « rééquilibrage des tarifs » approuvé par le CRTC en vertu duquel l’augmentation des tarifs des communications locales subventionnait effectivement la réduction des tarifs des appels interurbains. Les autres augmentations se justifiaient par les besoins en revenus des ESLT, l’élargissement de la zone d’appel locale, les nouveaux frais additionnels obligatoires pour le service d’urgence (911), le service de transmission des messages et les régimes de contribution fondés sur les revenus afin de financer les zones de desserte à coût élevé. Les frais additionnels ou l’augmentation des frais pour l’Assistance-annuaire, le branchement et les frais d’entretien ont également été constaté durant cette période. De plus, les consommateurs ont remarqué que les prix des options tels que les services de messagerie vocale, d’afficheur et d’appel en attente avaient augmenté pendant la même période.
Le rapport examine les changements observés dans les plans d’appels interurbains offerts aux particuliers. On remarque une augmentation significative dans le nombre des options ainsi que des rabais offerts. Cependant, l’addition des frais mensuels « frais de réseau » imposés par les compagnies de téléphone applicables à la plupart des forfaits d’appels interurbains a diminué de façon significative les économies que pouvaient faire les consommateurs qui faisaient rarement, voire occasionnellement, des appels interurbains.
Étant donné les économies et les augmentations que génère une plus grande concurrence, il est important d’en tirer des conclusions. Afin d’évaluer les conséquences générales des variations de prix en matière de services téléphoniques, le présent rapport s’est basé sur trois profils d’utilisateurs principaux: nombre d’appels limité, nombre d’appels moyen et nombre d’appels élevé. Les profils des clients ayant un nombre d’appel limité et moyen sont chacun divisés en deux sous-profils qui reflètent de manière plus précise les habitudes relatives aux appels. Les profils des clients se fondent sur les données des compagnies de téléphone. Il n’est pas étonnant de constater que les consommateurs qui font fréquemment des appels sont les grands vainqueurs, leur facture de téléphone diminuant de 15 à 30 %. D’autre part, les clients qui font rarement des appels (environ 25 % des clients des ESLT) voient leur facture de téléphone augmenter de 35 % à 65 % sur dix ans. Les consommateurs se situant entre ces deux catégories (c.-à-d., nombre d’appels moyen) subissent également une augmentation entre 4 % et 33 % selon la zone.
Statistique Canada suit les fluctuations des prix à la consommation dans le secteur tertiaire des services téléphoniques selon une gamme de services représentatifs. Entre janvier et juin 1992, l’indice des prix de Statistique Canada pour les services téléphoniques a augmenté de 17,4 %. Même si cette augmentation est légèrement inférieure au taux d’inflation, il convient de noter que la période concernée a été l’une des plus fructueuses pour les compagnies de téléphone. L’amélioration de la productivité est due en grande partie à l’arrivée de l’informatique. On peut citer les commutateurs numériques qui ont réduit de façon importante les dépenses des compagnies de téléphone. Par exemple, le taux de croissance de la productivité de Bell Canada a été cinq fois supérieur entre 1988 et 2002 à la croissance globale à long terme de la productivité totale des facteurs. Par conséquent, il est probable que les frais des services téléphoniques auraient été largement inférieurs durant cette période s’ils reflétaient les coûts véritables.
Le présent rapport mentionne également la détérioration des services à la clientèle qui semble avoir accompagné l’arrivée de la concurrence pendant cette décennie. Les compagnies téléphoniques semblent plus se préoccuper d’attirer de nouveaux clients que de rendre service aux clients existants.
Aussi, alors que la concurrence offre au consommateur un choix plus varié, de nouveaux problèmes sont apparus. Il est de plus en plus difficile pour le consommateur de comparer les services offerts et les prix en vue d’obtenir des tarifs plus intéressants : les forfaits et les options changent trop fréquemment. Le marketing non-sollicité et frauduleux persiste. Les clients reçoivent trop souvent des informations inexactes sur les taxes et les frais associés à un forfait. Même si le changement de fournisseur sans le consentement du consommateur (« détournement ») ne constitue plus un problème majeur, il persiste toujours sur le marché.
Les services locaux de base n’ont pas été affectés durant cette période. Cependant, la concurrence dans ce secteur a débuté très lentement. Depuis 2002, la plupart des ensembles résidentiels au Canada n’ont toujours pas d’autre choix que les ESLT pour les appels locaux. Seuls quelques fournisseurs offrent d’autres services de télécommunications, et ce, dans des zones particulières.
Le rapport aboutit à la conclusion suivante : même si la concurrence a des avantages, comme un choix plus large, de nouveaux services et des réductions des frais d’appel interurbains, elle est aussi à l’origine de la hausse des frais d’appel en général pour le consommateur moyen, de la détérioration de la qualité des services et de nouveaux problèmes.
1 Décision CRTC 92-12
 
 
 

Consumer Groups make proposals for 900 service rules

Ms. Ursula Menke
Secretary-General
Canadian Radio-Television and
Telecommunications Commission
Ottawa, ON
K1A 0N2
BY FAX AND EMAIL
Dear Ms. Menke:
Re: Public Notice CRTC 2002-2: 900 Service
1. The following comments are submitted on behalf of the Consumers’ Association of Canada, the National Anti-Poverty Organization, and l’Union des consommateurs (“the Consumer Groups”, previously “ARCetal”), pursuant to the above-mentioned Public Notice.

Problems with 900 Service

2. Unfortunately, very limited data on customer complaints regarding 900 services has been made available to interested parties by way of the record of this proceeding. The Commission has provided no data on the complaints it has received, and the Companies have provided limited data in response to an interrogatory from the Consumer Groups. Our understanding of the problems experienced by consumers with 900 services is accordingly limited.
3. Nevertheless, the data provided by the Companies is revealing. Most notably, it shows that customer complaints regarding 900 services are on the increase. Moreover, Bell’s internal complaints data over a five month period suggests that complaint volumes are high (app.1,360/mo. in Ontario alone). The vast majority of these (78%) are first time occurrences.
4. The fact that Bell has seen fit to establish a dedicated group of service representatives for the purpose of handling customer complaints regarding 900 services in Ontario is further evidence of significant ongoing problems with 900 services.
5. Data provided by the Companies indicates that the most common complaint by far is that the call was not made (“denies call made” and “disputed the call”). “Call not authorized” is another common complaint. Less frequent, but still significant, are complaints that the caller was not aware of the charge.
6. Anecdotal evidence provides further insight as to the problems experienced by consumers with 900 services. Consistent with the Companies’ data, most of the complaints of which the Consumer Groups are aware deal with disputed charges appearing on telephone bills. For example, people have complained to PIAC and the Consumer Groups about being billed for 900 services they claim not to have used, and for which the telephone company refuses (at least initially) to waive charges.
7. Another problem of which we are aware is unsolicited call-backs by 900 service operators to previous callers to the 900 service. It would appear that 900 service operators are collecting telephone numbers of incoming calls (e.g., through “900 Caller Identifier”), and using that information to solicit repeat business from past users, without the users’ knowledge or consent. That such practices are currently prohibited under s.3.15 of the Service Provider Agreement does not appear to have solved the problem.
8. Other problems are suggested by the telephone companies’ own rules, such as their refusal to provide billing services to 900 services that use “repetitive scripts, long holding periods, extraneous verbiage or long downloading procedures as a means of prolonging the call”.
9. In the Consumer Groups’s submission, while the available evidence is limited in terms of elucidating the specific aspects of 900 service that cause problems for consumers, it does identify a number of specific problems, and does show that the current regime governing 900 services is inadequate. Clearly, much more needs to be done to prevent the problems driving these complaints.

The current approach to 900 service consumer protection

10. The current regulatory regime governing 900 services includes a number of consumer protections by way of the agreements between the 900 service providers and the telephone carriers. This regime centers around the following safeguards:

1. the consumer’s right to have first-time 900 service charges waived;
2. the consumer’s right to have all 900 service calls from their line blocked; and
3. advance notice to callers, prior to the imposition of any charges, of all charges that will be levied if the caller does not hang up.

1. Subscribers are thus protected against 900 calls from their line that they did not authorize and can’t control (via charge waivers and blocking), and callers are protected against unexpected charges for calls made by them to 900 services (via the preamble in each call).
2. However, the current regime is flawed in a number of respects. Below is a brief outline of some key respects in which the current regime needs to be improved. More detailed discussion of each, along with other suggestions, follows under separate headings.
3. First, the level of protection differs depending on whether or not the 900 service provider obtains billing and accounts receivable services from the telephone company. For the reasons set out below, under “Uniform Application of Consumer Safeguards”, the Consumer Groups submit that the same consumer safeguards should apply regardless of billing arrangements between 900 service providers and telcos, unless impractical. In particular, the right to a waiver of charges for first-time calls should apply in all cases.
4. Second, the existing safeguards are inadequate. They can and should be improved and supplemented so as to provide better protection against unauthorized and unintentional calls. See below, under “Additional Safeguards that should be implemented”. In particular, charge-backs should be automatic for first-time disputes; blocking should be free of charge; consent to incur charges should be demonstrated via positive action by the caller; and advance notice of per-call charges should be required in all cases, except where over-ridden by the consumer.
5. Finally, it should be recognized that a consumer protection regime centered around blocking and advance notice of charges leaves a gap: those subscribers who wish to have access to 900 services from their own lines, but who cannot stop unauthorized calls from being made. Such subscribers must choose between blocking their own access to 900 service or accepting responsibility for unauthorized calls. This gap could be covered through the option of personal password access to 900 services.

Telco-proposed revisions (TN 740 and TN 741)

6. The Companies have proposed a number of revisions to the existing agreements with 900 service providers, by way of Tariff Notices 740 and 741. The Consumer Groups support the revisions proposed in TN 740. As noted by the Commission in Telecom Order 2002-143, the proposed changes provide additional consumer safeguards without unduly burdening the service providers. However, the proposed revisions do not go far enough.
7. With respect to the proposed safeguard when 900 services are accessed via the Internet, the Consumer Groups note that the proposed wording in s.1.1(q) of the ARM Agreement requires that “Before charges commence, Callers to Internet protocol based 900 services must mouse click on an “I Agree” button, or otherwise clearly indicate their consent.” (emphasis added) The Consumer Groups are concerned that this provision may be interpreted as permitting negative option consent. In order for consumers to be effectively protected against unintentional 900 service calls via the Internet, it is critical that this rule clearly require an “opt-in” form of consent. We therefore propose that the phrase “through an opt-in process” be added to the end of the sentence quoted above.
8. While the Consumer Groups support the reduction of maximum charges for games of chance from $25 to $5, they submit that even $5 per call is too high for such services. Indeed, Quebec law stipulates a maximum charge of $0.50 for entry into games of chance. The Consumer Groups submit that the Quebec law provides an appropriate benchmark and that games of chance offered by 900 service providers across Canada should charge in a manner consistent with the most stringent provincial law. The maximum charge for games of chance offered via 900 services should therefore be $0.50.
9. Without evidence of customer demand, the Consumer Groups do not support the TN 741 proposal to double the maximum per call charge to psychic lines from $100 to $200. While some consumers may be willing to pay this much in order to maintain continuity of service, the Companies have provided no evidence of significant customer demand for increasing this limit. At the same time, there is evidence that customers are being taken advantage of by these services, and therefore need the protection of maximum per call charges (e.g., the Ottawa Citizen article referred to in The Companies(CRTC)9Apr02-11).
10. However, the Consumer Groups do support the lowering of the per minute charge for psychic line services, from $10 to $6, in keeping with current billing practices. There is no reason to permit rates higher than are currently being charged for this type of service. If anything, per minute rates should be capped at a lower rate than $6.
11. If the per call maximum charge for psychic lines is increased, the Consumer Groups submit that 900 service providers should be required to inform callers when their bill has reached certain amounts (e.g., at $50 intervals).
Indeed, such a notice requirement should be considered whenever the maximum per call charge is over $50. Such a warning would remind callers that they are running up a large bill, and that the responsibility for such bill is theirs.

Additional Safeguards that should be implemented

12. Even with the company’s proposed new safeguards, consumers will remain inadequately protected against unauthorized and unintentional 900 service charges. The Consumer Groups therefore propose the following additional safeguards:

Application of charge-backs to all first-time 900 service charges that are disputed

13. Section 6.4 of the ARM Agreement provides for the waiver of disputed charges where “reasonably disputed pursuant to each Company’s collection procedures for 900 service”, and where the disputed charges “pertain to calls made before a Caller has had the opportunity to avail himself of call blocking for 900 service”.
14. As noted above, anecdotal evidence suggests that some companies may be applying an unreasonably high standard to the first part of this test. A waiver-of-charges policy is only fair, given that 900 services are blocked only upon request rather than by default, and that telephone service is commonly shared among household members including, in many cases, children and mentally impaired individuals. Hence, subscribers are put at risk of unwillingly and unintentionally incurring large bills for 900 service, not by their own desire but rather by a regulatory regime which exposes them to such liability without their knowledge.
15. As long as the ability to make calls to 900 service providers is automatically provided to subscribers (rather than provided upon request), it is only fair that first time billing disputes are resolved in the subscriber’s favour, where any doubt exists. Such service charge waivers should be provided automatically upon dispute.
16. The Consumer Groups therefore submit that the charge-back rule should be modified so as to apply to all first-time disputed charges.
The fact that the Caller has never incurred 900 charges in the past, and has not yet been informed of the call blocking option, is proof enough of the reasonableness of the dispute. Telephone companies should not be in a position of judging the “reasonableness” of the dispute beyond these clear parameters.
Immediate notification of first-time 900 service charges over $50
17. Prior to the rule requiring service charge waivers and charge-backs in the context of 976 services, the CRTC required Bell Canada to notify subscribers “in writing whenever their total charges for 976 Service during a single billing period has exceeded $50.00 and, in addition, to make one attempt by telephone to notify subscribers directly”. This rule was retracted at the time that the charge-back rule was implemented.
18. If all first-time 900 service charges that are disputed by the customer are charged-back as a matter of course, then a notification requirement is not needed to protect consumers against liability. However, as noted above, the current charge-back rule includes a reasonableness test that can be, and apparently is in some cases, used by the companies to deny customers immediate reversal of the disputed charges.
19. If telephone companies continue to be arbiters of the reasonableness of customer disputes regarding first-time 900 service charges, an immediate notification rule should be implemented. Waiting up to 30 days before notifying customers of the fact that they have (for the first time) incurred substantial charges attributable to 900 service use, exposes customers to significant billing risk. Immediate notification by telephone would likely reduce the magnitude of charge-backs as well as the number of complaints that the companies have to deal with.
20. If the charge-back rule is not modified as proposed above, the Consumer Groups therefore submit that telephone companies should be required to notify customers immediately, by telephone, of any first-time 900 service charges over $50.
21. Such notification should include instruction on how to block future calls to 900 service charges. The Consumer Groups further submit that an immediate notification requirement should be considered in any case, given the additional benefits that it provides to both customers and telephone companies. Specifically, such notification would serve to reduce customer anxiety, customer time and effort involved in disputing the charges, and company time and resources spent dealing with complaints. Given the amount of resources currently deployed by Bell in the resolution of 900 service disputes, the costs of such notification might be less than the savings in terms of fewer disputes.

Unresolved disputes

22. Some disputes involve 900 service charges to previous users of the service (i.e. subscribers who do not qualify for the waiver of charges under Art.6.4 of the ARM). Such disputes do not automatically qualify for charge-backs, as long as the customer was offered (and refused) call blocking. Bell’s internal data, for example, indicates that close to one quarter of complaints do not involve first time occurrences, and 12% of complainants are not provided with a credit. In such circumstances, the dispute may not be resolved between the customer and the telephone company. The Consumer Groups submit that unresolved disputes should be dealt with in an expeditious and fair manner.
23. Specifically, where billing disputes have not been resolved within a given period (e.g., 30 days), they should be submitted to the CRTC for a ruling. Customers should not be charged interest on amounts in dispute.

Blocking Fee

24. As noted above, blocking of 900 calls is an integral aspect of the consumer protection regime applicable to this service. The alternative – blocking all 900 calls unless and until the consumer requests access to the service – should be considered if the current regime continues to generate high numbers of consumer complaints.
25. As noted in The Companies(ARCetal)27May02-2, most customers who complain about 900 service order call blocking when it is offered to them. Moreover, it appears that where call blocking is offered free of charge (e.g., by TELUS), many more customers take it. In Bell’s case, 56% of complainants to the Executive Office and/or CRTC ordered call blocking. Of its recorded complaints, TELUS reports that 91% take call blocking as part of resolution of the complaint. These statistics suggest that the $10 fee is a deterrent to some customers.
26. The justification for the $10 blocking fee appears to have been two-fold:

1. to compensate the companies for the incremental cost of implementing such blocking; and
2. to deter frivolous requests for call blocking.

1. The Consumer Groups submit that both of these justifications should be re-examined.
2. First, Company costs have changed significantly over time. Data on which the $10 charge was first established is, in the Companies’ own words, “so dated that it would be of little value in this proceeding”. In particular, it is likely that the costs of provisioning call blocking are substantially less now than they were at the time that the tariff was approved. Given that the call blocking fee is a deterrent for some customers who could benefit from the service, the Consumer Groups submit that the fee for it should be eliminated, or at least lowered to a level justified by reference to Phase II costs.
3. Second, any fear that some customers might use free call blocking frivolously is unsupported by the evidence. The Companies state that they “are unaware of any frivolous requests for 900 call denial/blocking”. The Consumer Groups can imagine no circumstances under which a request for 900 service blocking would be considered frivolous. Hence, there is no need to apply any fee for this service, other than to compensate the Companies for the incremental costs of providing it.
4. TELUS charges an administrative fee of $18 to remove or subsequently add call blocking. The Consumer Groups submit that this charge is inappropriate and contrary (in spirit if not technically) to the rule that a maximum of $10 be charged for this service. TELUS should be required to lower this fee to no more than $10.

Bills for 900 service calls should include full detail

5. The Companies note that “where the 900 charges are billed on the Companies’ bills, callers may call the appropriate company directly and receive information about the time and duration of the call as well as the identity of the service provider and the service provider’s toll-free inquiry line.”
6. In the USA, the Federal Trade Commission “900 Number Rule” stipulates that for each 900 call billed by the telephone company, the statement should include the date, time and, for services that have per-minute rates, the length of the call. These charges must appear separately from local and long distance charges.
7. While the Consumer Groups have not surveyed the Companies’ billing practices re: 900 services in order to determine whether they provide this information, the Companies’ response to ARC et al’s interrogatory on point (quoted above) suggests that they do not always provide time and duration of the call.
8. The Consumer Groups submit that the minimum disclosure requirements on telephone bills set out by the FTC are appropriate and should be adopted by the CRTC. The more information that consumers have on their bill statements about 900 service charges, the less likely it is that they will need to call the telephone company with questions about the charges.
9. The same billing disclosure requirements should apply to 900 service providers who bill directly, and to any other agents billing on behalf of the 900 service provider.
Telephone companies should not be permitted to disconnect, or threaten to disconnect, local or long distance service for failure to pay 900 service charges
10. The Consumer Groups are concerned, based on anecdotal information, that some companies may be threatening individual customers with disconnection if 900 service charges appearing on their bills are not paid. It is not clear how widespread this problem is. In any case, it would be helpful to establish a clear rule that failure to pay 900 service charges cannot result in disconnection of any service other than access to 900 services.
11. Subscribers are made vulnerable to unauthorized and unintentional 900 service calls by a regulatory regime which allows unlimited access to 900 services as a matter of default (rather than by customer choice). It is therefore completely inappropriate for telephone companies to threaten disconnection of local or long distance services for failure to pay 900 service charges. The appropriate measure to take in such a circumstance is to disconnect the customer from 900 services, not from basic local or long distance services.
12. The CRTC should do as the Federal Communications Commission (FCC) has done in the USA, and expressly prohibit disconnection of local or long distance service for failure to pay 900 number charges.
900 service providers should be made subject to collection practice rules reflecting industry standards and best practices
13. In Order CRTC 2001-502, dated 29 June 2001, the Commission directed Bell Canada to amend its ARM agreement with 976 providers to include the same list of prohibited practices, with necessary changes, as exist in the relevant provincial collection agency legislation and regulations. (Bell had proposed that 976 providers be required to use collection agencies that are provincially licensed, rather than in-house bill collection.)
14. Given “persistent complaints from callers about collection practices associated with 976 program calls that have been previously charged back and absorbed by a 976 SP”, as noted by Bell Canada in its application, the Commission considered that “in-house collection activities by a 976 service provider should follow the same practices in the provinces of Ontario and Quebec as those set out in the respective acts and regulations for third-party collection activities”.
15. The Companies state that the concerns about 976 collection practices do not exist with 900 services. While unethical/annoying collection practices do not appear to be the subject of many complaints reported in The Companies(ARCetal)27May02-1, the Consumer Groups submit that there is insufficient evidence on the record to conclude that they are not a significant cause of complaints regarding 900 services.
16. The Companies also point out in response to the ARC et al interrogatory that laws and regulations apply in any case, and therefore don’t need to be repeated in contracts. While this is true, the Consumer Groups submit that reminding parties of certain statutory obligations by way of the agreements, where compliance with such obligations has been problematic in the past, is likely to improve compliance and is therefore desirable.
17. For these reasons, unless it can be conclusively shown that unethical/annoying collection practices by 900 service providers are not a cause of consumer complaints, the Consumer Groups submit that the same rules regarding collection practices applicable to 976 providers should apply to 900 service providers.
18. Moreover, the Consumer Groups submit that the collection and reporting to credit bureaus of disputed 900 service charges should be prohibited, until the company handling the dispute has provided the customer with a full explanation of why it considers the charges legitimate, and the Commission has upheld the company’s right to collect

The preamble should apply to all 900 service calls

19. The limited data provided by the Companies on 900 service complaints shows that in some cases, the caller claims not to have been aware of the charge. Further measures, beyond those already in place and proposed by the Companies, can be taken to reduce these types of complaints. First, the preamble requirement should be extended to all 900 service calls, with the sole exception of caller-controlled bypass.
20. Article 3.4 of the SP Agreement sets out the preamble requirement. Exceptions to this requirement include situations where:

• the charge for the call is a flat rate of $3 or less, and the call does not involve a program that uses the receipting option or involve a number that is listed in a telephone directory or involve a program directed a callers under 18 years of age; and
• a repeat caller voluntarily bypasses the preamble (although such bypass must be disabled for 30 days following any price increase).

1. The Consumer Groups submit that the first exception to this rule should be removed, as it leaves open the potential for callers to be charged when they did not expect to be so charged. While charges of $3 per call may be considered trivial by some, $3 is a significant amount for many customers, and in any case can accumulate to a large amount over a 30 day period. To the extent that complaints involve charges for 900 service calls falling into this category, removing the exception for flat per call charges under $3 would likely reduce the incidence of unintentional 900 service activation, and hence the number of complaints.

Callers should be required to signal their desire to incur charges by way of a positive act

2. Another measure that would reduce the likelihood of 900 service callers being charged more than they expected for the call, is to require 900 service providers to obtain a positive indication from the caller that they wish to continue with the call, after the preamble setting out the applicable fees. This can be done at minimal cost and with little inconvenience to the customer, in the same way that IVR systems commonly require customers to “press #” in order to continue.

References to other 900 service programs, and requests or requirements to call the program number again, should be prohibited

3. Another way of limiting the damage caused by easily accessible 900 services is to prohibit 900 service providers from pressuring callers to use the service again, or encouraging them to call other 900 services. The Consumer Groups are not aware of the extent to which such practices contribute to the current level of consumer dissatisfaction with this service, but it is possible that they are part of the problem. Unless it can be conclusively shown that the practices in question are not a problem, such safeguards are appropriate. In any case, precautionary measures such as this are prudent even where there may be no clear evidence of abuse.

900 service providers should be required to inform callers of any free ways to enter a game of chance offered through the 900 service

4. As long as games of chance are offered via 900 numbers, it is important that consumers be fully informed of their options with respect to entering the game of chance. In particular, callers should be informed of any free ways to enter a game of chance offered through the 900 service both in general advertising and at the commencement of all calls to the 900 number in question, prior to any charges being applied.

Indirect access to 900 services

5. Another potential cause of unintentional 900 service calls is the linking of toll-free numbers with 900 numbers, such that customers may believe they are making a toll-free call when in fact they are being channeled into a pay-per-use calling service. For this reason, the FTC 900 Number Rule prohibits the following practices:

• using toll-free numbers for pay-per-call services, unless the caller has a pre-existing agreement with the company or the call is charged to a credit card;
• connecting callers directly from a toll-free number to a 900 number, and
• collect call-backs by 900 service providers where the customer has dialed a toll-free number first.

1. The Consumer Groups submit that similar safeguards are appropriate for Canadian consumers.

Uniform Application of Consumer Safeguards to all 900 Service Providers

2. The Consumer Groups strongly support the application of the same consumer safeguards to all 900 (and 976) service providers, not just those who choose to bill through the Companies. Consumers deserve to be protected from the same abusive practices regardless of billing arrangements between the 900 providers and telephone companies. Exceptions to uniformity of safeguards should be fully justified.
3. In addition to the new safeguards proposed above, the following existing safeguards which currently exist in the 900 Service ARM agreements should therefore also be included in 900/976 Service Provider Agreements and tariffs for 900 (and 976) services:

• service charge waivers for first time 900 service users who reasonably dispute the charges and agree to 900 service blocking;
• notification to customers disputing 900 service charges that they can have such calls blocked upon request to their local telephone company;
• maximum charges per call for programs aimed at persons under the age of eighteen;
• maximum charges per call for games of chance for profit;
• maximum charges per minute and per call for psychic line programs;
• maximum charges per call for subsequent value programs as set out in Art.7.5(d) of the ARM agreement;
• prohibition of charges for programs that use repetitive scripts, long holding periods, extraneous verbiage or long downloading procedures as a means of prolonging the call;
• customer privacy protection rules as set out in Schedule “D” to the ARM.

1. In the Consumer Groups’ submission, all of the above protections, which currently apply when 900 services are billed through the Companies, should also apply when 900 service provider bill consumers directly.
2. It is revealing that the Companies refuse to deal with certain types of 900 services, and indeed that they are considering withdrawing their 900 billing and collection service (The Companies(CRTC)9Apr02-14). Clearly, the cost to them of dealing with consumer complaints regarding 900 services – at least those of the types listed in Schedule “C” to the ARM – outweigh the revenues obtained from such 900 services. It follows that the very services that are not subject to the ARM Agreement (and hence the consumer protections therein) are the most likely to generate consumer complaints (and hence the most deserving of consumer protections). If anything, consumers need more protection, not less, in respect of direct-billed 900 services.
3. The Companies do not object to the application of service charge waiver requirements in the Service Provider Agreements and/or relevant tariffs: The Companies(CRTC)9Apr02-15. They do, however, object to the application of service-specific prohibitions and maximum charges, on the grounds that such restrictions would “amount to a form of control over the content or meaning of calls”, contrary to s.36 of the Telecommunications Act and possibly s.2(b) of the Charter of Rights and Freedoms.
4. The Consumer Groups submit that the service-specific restrictions proposed above would be approved by the Commission and would therefore meet the requirements of s.36 of the Telecommunications Act. Moreover, such restrictions, even if they were found to infringe the right to free speech, would meet the Charter requirement of being demonstrably justified in a free and democratic society.
5. In particular, the Consumer Groups note that the restrictions in question would not limit the ability of 900 service providers to offer their services. Rather, they would simply limit the charges that can be applied for certain types of services, and prohibit charges where the service prolongs the call unnecessarily. None of these restrictions unduly limit freedom of expression on the part of 900 service providers. To the extent that they infringe s.2(b) of the Charter, they do so in the aid of an important and legitimate goal: consumer protection, and would only involve only a minimal impairment of the right to free expression.

Consumer privacy rights should be explicitly protected

6. The Consumer Groups further propose that the privacy principles included in Schedule “D” to the ARM should also be included in the Service Provider Agreements.
7. These principles have been made law via the federal Personal Information Protection and Electronic Documents Act, which presumably applies to 900 service providers (almost all of which operate across provincial boundaries). Hence, it can be argued that they apply in any case and therefore need not be repeated in the service provider agreements. In response, The Consumer Groups submit that it is helpful to remind 900 service providers of their obligations when collecting caller information, by way of this Schedule.
8. Moreover, if there is any doubt about the application of PIPEDA to 900 service providers, then the rules should definitely be made part of the Service Provider agreements, such that customer privacy is properly protected.

Enforcement

The Commission should issue termination orders and should pursue offenders under s.73 of the Telecommunications Act
9. One problem with the current 900 service regime has to do with repeated violations of existing rules. The current approach to enforcement of 900 service rules appears to be inadequate.
10. It is critical that any rules, existing as well as new, are properly enforced. There is no point in creating rules that can be disregarded without consequence.
11. The only enforcement tool currently being used appears to be termination of service by the ILEC under the service agreement. According to the Companies, Bell disconnected 64 service providers for breaches of the ARM or SP agreements between 15 Sept 1999 and 14 March 2002. The vast majority of these disconnections (56) were for content violations. Eight (8) were disconnected due to misleading or deceptive preamble/advertising.
12. The Companies note that disconnection is part of the larger sanction of termination. Based on their experience, they “view termination as a sanction with limited effectiveness”. In particular, they note that:

• the prospect of liability for improper termination causes them to be cautious in suing this sanction;
• the termination process is “a relatively slow and procedurally cumbersome process”; and
• 900 service providers can take steps to limit the effectiveness of termination through the use of multiple corporate identities (i.e., treating terminated numbers as “little more than business overhead”).

1. Clearly, reliance on voluntary telephone company disconnection for enforcement of consumer protection regulations affecting 900 service is inadequate. The Companies themselves state that “in certain circumstances, …it would be appropriate for the Commission to take a more active role in sanctioning non-compliant 900 service providers”. The Consumer Groups therefore propose that the CRTC make disconnection orders when appropriate, based on complaints received or referred to them by the telephone companies.
2. In addition, the Consumer Groups note that s.73(2)(b) of the Telecommunications Act provides for prosecutions where a condition of service under s.24 of the Act has been contravened. Because the Service Provider Agreement is approved by the CRTC, the safeguards in it constitute “conditions of service”, as do the rules set out in relevant ILEC tariffs. As with telemarketing abuses, the CRTC should establish a streamlined process under which such prosecutions take place as a matter of course when 900 service providers are clearly violating the rules.
All of which is respectfully submitted,
Philippa Lawson
Counsel for The Consumer Groups
cc: Interested Parties, PN 2002-2
CRTC proceeding

Consumer Groups demand monthly bill detail by Bell and Aliant

Ms. Diane Rheaume
Secretary-General
Canadian Radio-Television and Telecommunications Commission
Ottawa, ON
K1A 0N2
BY FAX AND EMAIL
Dear Ms. Rheaume:
Re: Follow-up to Decision CRTC 2002-34:
Detailed Billing Statements
1. In para.805 of Decision 2002-34, the Commission initiated a process to determine whether Bell Canada and Aliant Telecom should be required to provide itemized billing statements to their customers on a monthly basis. The following comments are submitted on behalf of the Consumers’ Association of Canada, the National Anti-Poverty the Organization, and l’Union des consommateurs (previously “Action Réseau Consommateur”) (“the Consumer Groups”), pursuant to that process.
2. Most major telephone companies in Canada provide itemized bills for local as well as long distance service on a monthly basis, such that customers can see, each month, what local services they have subscribed to, and what they are paying for each service. Bell and Aliant (NB and Nfld), however, provide itemized bills only once per year and when there is a change to a relevant service or service charge. Otherwise, the monthly bill provided to residential customers contains no itemization of local services. MTS used to follow the practice currently followed by Bell and Aliant, but has reverted to monthly itemization. SaskTel has also begun implementing monthly itemized statements to its customers.
3. The Consumer Groups strongly support the Commission’s preliminary view that all ILECs should provide customers with itemized billing statements on a monthly basis.

Separate the issues of billing frequency from billing detail

4. In its submission, Aliant argues that “Customers should be able to specify the billing detail they desire and the frequency of its delivery.” (para.6)
5. It may be helpful to separate the issues of billing frequency and billing detail for the purposes of this proceeding. Billing frequency per se (i.e., monthly as opposed to quarterly or semi-annual) is not an issue in this proceeding; all ILECs appear to bill their residential customers on a monthly basis, and are not proposing to change this practice. It is in this context that the Commission has invited comments on the issue of itemized billing statements.
6. The bottom line, in the Consumer Groups’ submission, is that all bill statements should be sufficiently detailed that customers can determine from each billing statement what services they are subscribed to and how much they are paying for each service. Thus, as long as companies bill for service on a monthly basis, each monthly bill should include the minimum level of detail considered adequate by the CRTC.
7. On the question of how frequently bill statements should be delivered to customers, the Consumer Groups submit that the standard practice of monthly billing should not change without a public proceeding to examine the implications of less frequent billing.

Why bill detail is important

8. Itemization of each separate charge on each bill statement is particularly important so that customers can see, on any given statement of account, what optional local services they are subscribed to, and how much they are being charged for each optional service.
9. Without such itemization, customers can lose track of the various optional services they are subscribed to, and can end up paying for services they neither want nor need. For example, customers seeking ways to reduce their monthly telephone bill may be unaware of the fact that they can do so by canceling certain optional services. They may instead assume that the consolidated local charge shown on the bill is entirely mandatory.
10. In addition, customers may believe that they have ceased subscribing to a given service (e.g., an optional service provided free of charge for a limited period of time, or a rental telephone set no longer used) when in fact the company is continuing to charge them for the service. Anecdotal evidence available to the Consumer Groups indeed suggests that such misunderstandings are not uncommon when companies fail to provide itemized bills on a monthly basis.
11. Both Bell and Aliant argue that their customers are satisfied without monthly itemized billing, and that requiring them to provide detail on a monthly basis to every customer is therefore unnecessary and inefficient. They cite QofS monitoring results indicating that customer complaints regarding billing are minimal.
12. In response, the Consumer Groups note that just because customers have not formally complained in large numbers about the lack of bill detail on a monthly basis does not mean that they are satisfied with it. In order to properly test customer satisfaction on this issue, focus groups and/or customer surveys need to be conducted. Indeed, Bell’s own focus group testing indicates that customers prefer the level of detail provided by Bell on the annual statement.
13. Given the importance of the underlying principle (full information to customers), however, the Consumer Groups submit that testing of consumer preferences on this issue is unnecessary. Customers who wish to forego their right to a monthly detailed bill may be able to do so upon request. Others should be entitled to a detailed bill as a matter of default.
14. In Telecom Decision 86-7, the Commission ordered ILECs to provide customers with detailed itemized bills “at service commencement, after any rate or service and equipment changes and, at a minimum, once a year”.
15. It is important to recognize the tremendous changes that have occurred to residential telephone service since 1986. At that time, customers had relatively few options in terms of local service. Over the past 16 years, dozens of new optional services have been made available to customers, and the companies have transformed themselves into aggressive marketers of these services such that large numbers of customers subscribe not only to basic local service, but also to any number of local optional services. Indeed, average revenues per residence NAS for optional local services in 2001 ranged from app. $5-$9 per month, according to data provided by the Companies in the recent Price Cap review proceeding.
16. The fact that annual itemization of local service charges was considered appropriate in 1986 thus in no way suggests that annual itemization of such charges is sufficient for telephone customers in 2002. The context is now entirely different.
17. It is further instructive that the US Federal Communications Commission has seen fit to require telephone companies to provide “full and non-misleading descriptions of all charges” on all telephone bills. Specifically, the FCC rules state that:
“Charges contained on telephone bills must be accompanied by a brief, clear, non-misleading, plain language description of the service or services rendered. The description must be sufficiently clear in presentation and specific enough in content so that customers can accurately assess that the services for which they are billed correspond to those that they have requested and received, and that the costs assessed for those services conform to their understanding of the price charged.”
18. Canadian consumers should be no less protected than American consumers in this regard.

Bill detail vs. paper reduction

19. Aliant states that NBTel withdrew monthly itemized billing “a number of years ago when customers raised serious concerns about the amount of paper utilized to provide monthly billing detail”.
20. The Consumer Groups share the environmental concerns raised by these customers, and concur with the goal of minimizing unnecessary paper usage. However, this goal must be weighed against the goal of providing adequate billing information to customers on an ongoing basis. In any event, the goal of paper reduction can be achieved while providing meaningful bill detail to customers who have not requested otherwise. Specifically, much of what appears on current bills is relatively unimportant (in some cases even meaningless) from the consumer perspective; the length of billing statements can be significantly reduced without sacrificing important bill detail.
21. In any case, the Consumer Groups submit that the issue of paper reduction centers around the manner in which charges and services are identified on the bill, not whether or not bill detail is provided. In para.806 of Decision 2002-34, the Commission “concludes that it would be appropriate for these issues of content and related issues to be considered by the BMT Committee”. That is the appropriate forum in which to discuss ways of minimizing paper usage in the billing process.

Billing detail should be the default

22. Both Bell and Aliant propose to offer monthly bill detail only to those customers who request it. The companies would make customers aware of this option via a bill insert. In this way, they suggest that the costs of monthly billing can be minimized while customer desires for more frequent billing detail can be accommodated.
23. In other words, the companies wish to make less frequent bill detail the default (or standard) service offering. Customers would be able to get more frequent bill detail, but only upon request. This proposal has a number of important implications:

• because results are always biased toward the default, many customers who would in fact prefer the option of detailed billing will never exercise it (whereas, if the default were detailed billing, many customers who would be satisfied with less frequent detail will never choose it);
• because of this inertia effect, many people will be denied the billing detail they need in order to make informed choices on an ongoing basis; and
• the companies will be in a position to treat the option of more frequent billing detail as a value-added service, for which a charge may apply.

1. If the companies wish to ensure that all customers who want monthly bill detail get it, they would treat monthly billing detail as the default, and offer the option of less frequent billing detail to those who specifically request it. Instead, they have proposed an approach which achieves meaningful consumer choice only if all customers are fully informed of their options, appreciate the implications thereof, and can quickly and easily exercise the option at no cost. In the Consumer Groups’ submission, none of these preconditions to meaningful choice apply.
2. First, many customers will not be aware of the option, despite any number of bill inserts and statements on the bill. In a nation-wide survey conducted by EKOS Research for PIAC and other organizations in 1996, 34% of respondents said that they rarely or never “read the inserts the telephone company sometimes sends with its bills”. A further 35% only read inserts “sometimes”. Recent experience with customer complaints regarding Bell Canada’s imposition of a minimum $4.95 charge on its First Rate discount toll plan further confirms that many customers do not notice important messages delivered via bill insert (many customers were unaware of the new charge until it appeared on their bill, despite a bill insert notifying them of it in advance).
3. Given that most bill inserts received by customers fall into the category of “junk mail” (i.e., marketing material), it is not surprising that many customers fail to notice the few that contain important information. In the Consumer Groups’ submission, important notices cannot be effectively communicated through a medium which is used primarily for marketing purposes.
4. Second, requiring customers to write or telephone the service provider in order to obtain detailed bills on a monthly basis is sufficiently onerous that many customers who would prefer monthly detail will not in fact get it. Even if they are adequately informed, many customers will fail to take advantage of the option provided, simply because of the effort required to do so. Telephone companies should not be permitted to take advantage of this “inertia” effort to the detriment of consumers.
5. Clearly, the companies are seeking ways to reduce their billing costs. One way is to provide monthly billing detail only to those customers who request it. (Another is to replace paper bills with electronic bills.) While efforts to reduce unnecessary costs are commendable, The Consumer Groups submit that the companies’ proposal goes too far in terms of sacrificing important customer information for the sole purpose of reducing cost.
6. The default level of service provided to customers should be that which (a) automatically provides customers with the information necessary to make informed choices about their ongoing service on an ongoing basis, and (b) conforms to general customer expectations and desires. Options for a lower (or less costly) level of service, whether it be replacement of the paper bill with an online bill, less billing detail, or any other option, should not be forced upon any customer without their informed consent.
7. Billing detail should therefore be provided on a monthly basis to all customers, unless they request otherwise. Moreover, there should be no extra cost to the customers associated with this level of service. While the companies have not yet attempted to charge for monthly detailed bills, it would be a logical next step for them to take once they establish a standard of billing involving less-than-monthly detail.
8. The Consumer Groups are concerned with this apparent trend toward lower standard levels of service to residential customers. Monthly bill detail may be just the first example: paper bills could be the next. It is important that a Consumer Bill of Rights clearly establish the standard of service to which all customers are entitled without extra cost.

The costs of providing monthly bill detail are covered by existing rates

9. Both companies state that a requirement to provide monthly billing detail would cause them to incur costs, both initial and ongoing. Hence, they argue that all such costs should be recoverable from ratepayers. Specifically, Bell proposes that “it should be allowed to draw down from the deferral account any incremental expenses and/or capital costs which would be attributable to the provision of detailed billing on a monthly basis.” (para.5) It is not clear whether the companies are proposing to treat these expenses as exogenous factors.
10. The Consumer Groups strongly oppose any such downloading of normal costs of business onto ratepayers, for a number of reasons. First, it would be unfair to those companies who have, in the best interests of their customers, implemented or continued to implement monthly itemized bills without any such cost recovery. It would instead reward those companies who have chosen to reduce customer service in the name of cost reduction.
11. Second, it would ignore the cost savings that these companies have generated as a result of infrequent billing detail. The general marketplace standard for billing of ongoing services is to provide full detail on a monthly basis. This is what customers expect, and what they need in order to make informed purchasing decisions on an ongoing basis. Companies that have saved money by providing less than this standard of billing should not now be able to recover from ratepayers the cost difference between the two approaches to billing.
12. Third, the new price cap regime was established on the basis of general cost data and regulatory principles; the companies were not subjected to revenue requirement examinations, and rates were not “rebased”. The companies thus benefited from a lack of scrutiny of their reduced costs (vs. rates) for specific services. For them to suggest now that increased costs as a result of the price cap decision should be treated like exogenous factors and recovered via the deferral account is inconsistent and unfair to ratepayers.
13. Finally, the Commission’s direction to provide monthly bill detail comes as part of the establishment of the new price cap regime, not as a regulatory requirement imposed on the companies during the course of a price cap regime. The fact that there are costs associated with this direction has been taken into account by the Commission in the establishment of the new price cap formula. To recover such costs via the deferral account would therefore result in double-counting, to the benefit of company
All of which is respectfully submitted,
Philippa Lawson
Counsel for the Consumer Groups
cc: Interested Parties, PN 2001-37
 
CRTC proceedings

PIAC opposes disconnection of local phone service for non-payment of toll charges

DISPUTE
CRTC BMT/Telephone Access Committee
Subject of Dispute: Terms of Service regarding disconnection of basic local service for non-payment of toll or other non-tariffed charges Dispute Initiator: Philippa Lawson, PIAC/NAPO Date: June 26, 2002
Dispute Description: This dispute can be divided into a number of elements, as follows:
1. Do the terms “service”, “account”, and “payment” in Article 22.1, 22.1(a), 22.1^©, 22.1(h), 22.2, 22.2(b) and 22.2^© of Bell Canada’s Terms of Service refer to tariffed services only, or to non-tariffed services as well?
2. Is Bell permitted, under Art.22.2(a) of its Terms of Service, to disconnect the local service of a customer who has paid enough to cover local service charges (current and arrears)?
3. Is TELUS permitted, under Art.115.4 of its Terms of Service, to disconnect local service of a customer who has paid enough to cover local service charges (current and arrears)?
4. Should the rules regarding disconnection of basic local service for non-payment of toll and other non-tariffed charges be uniform among ILECs?
5. What rule(s) should apply to ILECs in respect of disconnection of local service where the customer has arrears in respect of non-tariffed services (e.g., toll, 900 service) and is making partial payments?
6. What rule(s), if any, should apply to ILECs in respect of their communications to customers regarding potential disconnection for non-payment? (For example, should ILECs be required to distinguish between local, toll, and possibly optional service, disconnection?)
History of Dispute within Committee:
This issue was raised by PIAC in the first Committee meeting (April, 2001).
Through discussion and interrogatories, it became clear that:
1. the existing terms of service on this point are interpreted differently by different parties (even among companies);
2. there is a significant difference in the rule applicable to TELUS and SaskTel, on one hand, versus the rule applicable to Bell, Aliant and MTS on the other hand;
3. even among companies subject to the identical rule, practices differ and there is disagreement as to how the rule should be interpreted; and
4. ILECs and consumer groups disagree on the rule(s) that should apply in this situation.
In an email dated May 13, 2002, PIAC/NAPO proposed to treat the matter as a dispute. TELUS and Bell, in response, requested that further discussions take place before treating the matter as a dispute. Further discussions were held at the June 17, 2002 meeting, with a view to achieving consensus on any of the above-noted issues. No consensus could be reached.

Issue Background

In Telecom Letter Decision CRTC 88-4, regarding Bell Canada’s collection practices in respect of its 976 service, the Commission noted that under Bell’s Terms of Service, “Bell may deny service for non-payment of tariffed charges but not for the non-payment of non-tariffed charges.” The Commission ordered as follows:
“The Commission reiterates that non-payment of non-tariffed charges cannot result in denial of service. Accordingly, it would be unacceptable for the company or any party acting on behalf of the company to suggest that disconnection of service would result from non-payment of 976 non-tariffed charges. As customers may not differentiate between the payment of tariffed and non-tariffed charges, the Commission directs that, any partial payments are to be applied first to tariffed charges.”
In the proceeding that led to Telecom Decision CRTC 96-10 (Local Service Pricing Options), a competitors and consumer groups argued that ILECs “should not be permitted to continue the practice of disconnecting local service for the non-payment of toll bills”. The Commission rejected this argument, reasoning that:
”…the approved procedures which must be followed by the companies in order to suspend or terminate service area adequate to prevent unjust discrimination against other long distance providers or the conferral of an undue preference in favour of the Stentor member companies”. (p.18)
In Telecom Decision CRTC 98-4 (Joint Marketing and Bundling), the Commission summarized its approach to partial payments in the context of bundled services as follows:
”…In those Decisions [97-11 and 97-12], Bell and TELUS were permitted, without the requirement to file tariffs, to bundle tariffed telecommunications services with non-telecommunications services subject to the condition that the bundled service must not be sold for less than the sum of the tariffed rates of the telecommunications services and that the bundled service must not be designed to circumvent the tariff for any tariffed service included in the bundle. The companies were also required to itemize the tariffed services on the customer’s bill and to ensure that payments for bundled services were allocated first to primary exchange services and other tariffed services….”
By way of letters to ILECs dated April 11, 2000, CRTC staff noted as follows:
“With regard to your policy for partial payment, we note that most companies do not differentiate between tariffed and non-tariffed charges in arrears and would have to incur additional costs to either modify their billing systems or to manually track tariffed and non-tariffed charges on past due account[s].
In our view, those costs would likely outweigh the benefits that customer facing disconnection for making partial payments would receive. In light of the above, we consider that your current policies regarding toll denial and the application of partial payment do not appear to be unreasonable…..”

Proposed Resolution

PIAC/NAPO’s position on this issue is set out in our email of June 7, 2002. In respect of the specific issues set out above, PIAC/NAPO’s position is as follows:
Regarding the existing rules:
1. The current Terms of Service relate only to tariffed services. Hence, references to “service”, “account”, and “payment”, unless otherwise specified, refer to tariffed services, accounts, and payment therefor only.
2. Bell is not permitted to disconnect the local service of a customer who has paid enough to cover their local service charges, or who has complied with a “reasonable deferred payment arrangement” regarding any local service arrears.
3. TELUS and SaskTel may be permitted to disconnect the local service of a customer who has paid enough to cover their local service charges, or who has complied with a “reasonable deferred payment arrangement” regarding any local service arrears. (This is not clear.)
and regarding what rules should apply:
4. The same rule regarding disconnection of local service for non-payment of non-tariffed service charges should apply to all ILECs equally.
5. The appropriate rule on this issue is as follows:
That, unless otherwise directed by the customer, partial payment be applied to basic local service charges first, regardless of the relative age of outstanding bills. Remaining payment should then be applied to other charges by oldest outstanding. Basic local service should only be disconnected where the customer has failed to pay basic local charges, and only after attempts have been made to negotiate a reasonable deferred payment agreement regarding any outstanding local charges. Failure to pay toll charges should result in toll blocking, and failure to pay optional local service charges should result in disconnection of those services, before basic local service is disconnected for non-payment.
ALTERNATIVELY,
That the companies continue to apply partial payments as they wish, but that there be no disconnection of basic local service as long as the partial payment covers local charges, or is in keeping with a reasonable deferred payment agreement regarding outstanding local charges. Failure to pay toll charges should result in toll blocking, and failure to pay optional local service charges should result in disconnection of those services, before basic local service is disconnected for non-payment.
6. ILECs should not threaten to disconnect a customer’s basic local service as long as customer payments cover basic local charges. ILECs should threaten toll disconnection for failure to pay toll charges, and optional service disconnection for failure to pay optional service charges.
END OF DOCUMENT

Explanatory Notes

DISPUTE
CRTC BMT/Telephone Access Committee
Subject of Dispute: Terms of Service regarding disconnection of basic local service for non-payment of toll or other non-tariffed charges Explanatory Notes
“Terms of Service” are the rules that apply to the phone company in respect of the regulated services it offers. They are found in the front of your telephone directory.
“Tariffed services” are telephone services set out in a regulated “tariff” that has been approved by the CRTC. In other words, they are services whose rates are regulated by the CRTC. Basic local service is tariffed, but long distance service is not.
“ILECs” stands for “Incumbent Local Exchange Companies” and means the local phone companies that have been providing service in their territories for ages.
“toll service” is the same as “long distance service”
CRTC proceeding
 

Say NO to ATM Convenience Fees!

Since January 2002, some financial institutions have been charging convenience fees ranging from $1.25 to $1.50 to individuals using their automated teller machines (ATMs) who are not that bank’s customers. This fee is in addition to the INTERAC fee (which ranges from $0 to $1.50). Certain financial institutions (National Bank, Royal Bank and Caisse Desjardins) are charging this convenience fee at all of their ATMs while others (CIBC, Scotiabank and TD Canada Trust) are only charging them at their off-premise or non-branch locations.
PIAC invites you to express your discontent with these fees by sending the letter that follows to the president and/or chief executive officer of the financial institutions charging convenience fees at their ATMs:

• Mr. John Hunkin, Chairman and CEO, CIBC
• Mr. Réal Raymond, President and CEO, National Bank
• Mr. Gordon M. Nixon, President and CEO, Royal Bank
• Mr. Peter Godsoe, Chairman and CEO, Scotiabank
• Mr. Edmund Clark, President and CEO, TD Bank Financial Group
• M. Alban D’Amours, Fédération des caisses Desjardins du Québec

Comments on use of charge-backs as a form of consumer protection

Consumer Measures Committee (CMC)
c/o Mr. Philip Halliday
Office of Consumer Affairs
Industry Canada
Room 962A, C.D. Howe Bldg.
235 Queen St.
Ottawa, ON K1A 0H5
BY FAX AND EMAIL
Dear Mr. Halliday:
Re: Use of Charge-backs as a form of consumer protection:
CMC Stakeholder consultation
The following are PIAC’s comments on the CMC Stakeholder Consultation Document “Use of Charge-backs as a form of consumer protection”.
The Public Interest Advocacy Centre is a national non-profit organization devoted to the representation of consumer interests in matters involving public utilities, essential services, and public interest issues of broad application to Canadians. Our focus is on the protection of lower income and vulnerable consumers, and on issues not already being addressed by other public advocacy groups. PIAC has developed a strong record of consumer advocacy since its inception in 1976, and is widely recognized as an important and influential voice for ordinary consumers in a variety of marketplace issues. PIAC is governed by a distinguished volunteer Board of Directors from across the country, and is supported by member groups and donors representing hundreds of thousands of Canadians.
1. Should the statutory charge-back remedy for contract cancellation rights be extended to apply to all sales channels in addition to Internet sales contracts (and distance sales, in the case of Quebec)?
Yes, it makes sense to provide a statutory charge-back remedy to consumers regardless of the medium through which they purchase (i.e., offline or online). From the consumer perspective, it would be difficult to understand why improper charges on their credit card may or may not be subject to this remedy, depending on whether the merchant in question was supplying goods offline or online.
Improper charges occur for a variety of reasons, not limited to the online context. Charge-back remedies should be available, under the same terms and conditions, wherever the payment mechanism used is susceptible to them.
2. Should the statutory charge-back remedy be extended to apply to situations of error correction?
Yes. Charge-backs should be available to consumers in all cases of improper billing due to a fault which is not their own.
Charge-backs should also be available in cases where the good or service ordered and paid for was delivered, but did not arrive in a reasonable time, did not arrive in good order, or was not as described, where the merchant refuses to refund upon return.
3. Should the statutory charge-back remedy be extended to apply to payment mechanisms in addition to credit cards? If yes, to which payment mechanisms?
Charge-backs only make sense where the payment system operator can “charge back” the merchant. If this is possible in other contexts such as debit cards, then there is no reason not to apply the same remedy in that context.
4. What sort of time limits should be included in a charge-back system?
The time limits that apply under the US Fair Credit Billing Act are reasonable and should be adopted here. (E.g., complaints to be lodged within 60 days, or at least 3 days before automatic payment will be made in order to stop payment; acknowledgement of receipt of consumer complaint to be made within 30 days; dispute to be resolved within 2 billing cycles or 90 days, whichever is less; cardholder to appeal resolution within 10 days)
5. Should there be a requirement for disclosure regarding charge-back rights?
Absolutely. Disclosure – and hence consumer awareness – is essential if the remedy is to be meaningful. Given that there is no incentive for credit card companies to make consumers aware of their chargeback rights (indeed, the incentive is to be mute about the possibility of charge-backs), statutory requirements for disclosure are required. In order to ensure that consumers are fully and properly informed, detailed rules are needed. The US Fair Credit Billing Act provides a good model for disclosure rules.
6. Should the obligations between credit card companies and merchants be addressed in the charge-back remedy?
No. The statutory remedy should address only what needs to be addressed in order to provide redress to the consumer. Credit card companies can and will draft their merchant agreements accordingly.
Yours truly,
original signed
Philippa Lawson
Counsel