GAO

United States General Accounting Office

Report to the Chairman, Permanent 

Subcommittee on Investigations, 

Committee on Governmental Affairs, U.S. 

Senate

July 1999 TELECOMMUNICATIONS

State and Federal Actions 

to Curb Slamming and 

Cramming

GAO/RCED-99-193

Page 1 GAO/RCED-99-193 Telephone Slamming and Cramming

United States General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-281703 Letter

July 27, 1999

The Honorable Susan M. Collins

Chairman, Permanent Subcommittee

 on Investigations

Committee on Governmental Affairs

United States Senate

Dear Madam Chairman:

Two types of abuses involving telephone services have become prevalent 

nationwide. The first, called “slamming,” involves switching a consumer’s 

telephone service from one telephone company to another without the 

consumer’s authorization. The second, called “cramming,” involves placing 

unauthorized charges on a consumer’s telephone bill for services and 

products. Both state and federal agencies are responsible for protecting 

consumers from these abuses and taking regulatory and legal enforcement 

actions against their perpetrators. At the state level, public utilities 

commissions are responsible for regulating intrastate telephone services 

and resolving consumers’ complaints, while the attorneys general are 

responsible for resolving consumers’ complaints about unfair and 

deceptive marketing practices. At the federal level, the Federal 

Communications Commission (FCC) is responsible for protecting 

consumers against slamming, while both FCC and the Federal Trade 

Commission (FTC) are involved in protecting consumers against 

cramming. Under these separate statutory schemes, FCC’s authority is 

focused on preventing cramming by common carriers (telephone 

companies), while FTC’s authority is focused on preventing cramming by 

companies that are not common carriers, such as vendors that use 

telephone bills to charge for their services. The Congress has, in some 

limited circumstances, granted FTC concurrent authority with FCC to 

establish rules concerning certain areas of telephone billing and collection.

You asked us to report on the scope of these problems and on state and 

federal actions taken to combat them. Specifically, you asked us to 

describe the (1) number of complaints about slamming and cramming 

received by state and federal authorities, (2) types of protections 

implemented by state and federal authorities to increase consumers’ ability 

to protect themselves against slamming and cramming, and (3) state and 

federal enforcement actions taken against slamming and cramming 

violations since 1996, including the names of the companies or individuals 

Letr
B-281703

Page 2 GAO/RCED-99-193 Telephone Slamming and Cramming

most frequently subject to such actions. To address these issues, we 

surveyed the public utilities commissions of all 50 states and the District of 

Columbia and assisted the National Association of Attorneys General in 

surveying each state’s office of attorney general and the District’s corporate 

counsel. In addition, we met with FCC and FTC officials to gather 

information on the enforcement actions they have taken against companies 

engaged in slamming and cramming. We also discussed recent regulatory 

initiatives by FCC and FTC to combat these abuses and improve their 

ability to take enforcement action.

Results in Brief Slamming continues to be a significant problem for consumers. From 1996 

through 1998, state public utilities commissions saw the number of 

complaints about this abuse rise from 20,741 to 39,688 (a 91-percent 

increase), and federal authorities saw the number of complaints rise from 

12,795 to 20,154 (a 57-percent increase). In addition, cramming has 

emerged as a new problem. Complaints to state authorities rose sharply 

from about 800 in 1996 to nearly 20,000 in 1998. In 1998, complaints about 

cramming became the fourth most common type of written complaint 

received by FCC and the second most common type of complaint received 

by FTC.

To help protect consumers against slamming and cramming, most state 

public utilities commissions (1) require telephone companies to obtain oral 

or written authorization from consumers before making changes to their 

service, (2) have procedures for resolving consumers’ complaints, and (3) 

provide consumers with information on ways to prevent telephone 

slamming and cramming. At the federal level, FCC adopted new rules 

against slamming in December 1998 that strengthen procedures for 

verifying changes in service and absolve consumers of liability, within 

certain limits, for charges by unauthorized companies. However, the Court 

of Appeals for the District of Columbia has delayed the implementation of 

these liability provisions at the request of several long-distance companies, 

which have proposed the establishment of a neutral third-party 

administrator to implement the liability rules. To protect consumers 

against cramming, FCC adopted new rules in April 1999 requiring 

telephone companies to format their bills so that consumers can more 

easily identify any unauthorized charges. In October 1998, FTC proposed 

rules addressing cramming that would, among other things, require a 

consumer’s express authorization before charges other than for local or 

long-distance calling could be placed on the consumer’s telephone bill and 

Letr
B-281703

Page 3 GAO/RCED-99-193 Telephone Slamming and Cramming

would allow the consumer to dispute any unauthorized charges. These 

proposed FTC rules could be final before the end of 1999.

State commissions were able to resolve through informal action nearly 60 

percent of the slamming complaints they received in calendar year 1998. In 

addition, from 1996 through 1998, the public utilities commissions and 

attorneys general in 35 states reported completing 219 formal enforcement 

actions against companies or individuals for telephone slamming and 

cramming violations. As a result of these state actions, which affected at 

least 397,765 consumers, violators were ordered to pay at least $27 million 

in restitution and penalties. The state public utilities commissions also 

reported initiating over 3,900 enforcement actions for slamming and 

cramming that had not been finalized as of early 1999. At the federal level, 

FCC has ordered 23 companies and individuals to pay $17.1 million in civil 

monetary penalties (forfeitures) for telephone slamming violations since it 

took its first enforcement action for slamming in 1994. One slamming case 

also involved cramming. To date, FCC has collected $2.6 million of these 

forfeitures in 12 of these actions. Since April 1998, FTC has taken seven 

enforcement actions against cramming that have resulted in injunctions 

and restraining orders. Two of these companies have agreed to final 

stipulated court orders providing consumers with $53 million in credits and 

restitution and have agreed to modify their business practices. 

Background Slamming, which began to emerge in the mid-1980s, is the switching of a 

consumer’s telephone company without his or her knowledge or consent. 

Consumers have the right to use any telephone company they have 

available to them and to change telephone companies whenever they wish. 

Under the Communications Act of 1934, as amended, it is unlawful to 

switch a consumer’s preferred telephone company without his or her 

express consent.1

 Nevertheless, some telephone companies or their 

marketing agents have used deceptive contests, surveys, and telemarketing 

to lure consumers into switching to their service. For instance, a person 

filling out a form for a contest drawing may not notice that it contains fine 

print authorizing a switch in telephone service. Long-distance providers, or

1

47 U.S.C. 258. 
B-281703

Page 4 GAO/RCED-99-193 Telephone Slamming and Cramming

telemarketers acting on their behalf, may also falsify records to make it

appear that consumers have agreed verbally or in writing to a switch.2

Cramming, a more recent problem, is the placing of unauthorized, 

misleading, or deceptive charges on a consumer’s telephone bill for 

services and products. Cramming can include unauthorized charges for 

services offered by the consumer’s own telephone company, such as call 

messaging, or charges for services from other businesses or vendors selling 

their services. Some of these vendors, known as “information providers,” 

provide recorded or live information and entertainment, such as stock 

market, sport, and product information, as well as “adult” services, “chat” 

lines, and psychic advice. Consumers generally call an advertised 

telephone number to receive the information or service. Some information 

providers have levied hidden or deceptive charges, even recurring monthly 

charges, that consumers did not know about and did not authorize. 

Typically, an information provider will use the services of a larger company, 

called a billing aggregator, that bundles the billing information from many 

separate vendors and contracts with telephone companies to have the 

charges included on consumers’ telephone bills.

The format of telephone bills can make it hard for consumers to recognize 

that they have been slammed or crammed, especially when charges for 

these services are listed on their bills in vague terms, such as “monthly fee,” 

“service fee,” “mail server,” or “membership.” The bills may not even 

clearly identify the entities charging for these services, making it difficult 

for consumers to contact them directly to have the charge explained or 

removed.

Consumers who are the victims of slamming or cramming can attempt to 

resolve the problem by directly contacting the telephone company or 

vendor involved. They can also file a complaint with their state public 

utilities commission or their state attorney general’s office. These two 

bodies may attempt to resolve the complaint informally, or they may take 

formal regulatory or legal action, as authorized by state statute, against the 

offending companies.

In addition, consumers can send complaints about slamming and cramming 

to both FCC and FTC. Each complaint that FCC receives is sent to the 

2

This type of fraud is discussed in our earlier report Telecommunications: Telephone Slamming and Its

Harmful Effects (GAO/OSI-98-10, Apr. 21, 1998).
B-281703

Page 5 GAO/RCED-99-193 Telephone Slamming and Cramming

appropriate company. The company, in turn, sends its response to the 

complaint to both FCC and the affected consumer. On the basis of these 

complaints, FCC investigates patterns of slamming and cramming and 

takes enforcement action when appropriate. FTC uses the cramming 

complaints it receives, along with complaint data provided by state-level 

sources and other contributors to its complaint database, to take law 

enforcement action against individuals and companies engaged in this 

abuse. FCC shares cramming complaints with FTC, and FTC, in turn, 

shares slamming complaints it receives with FCC. As discussed below, 

both FCC and FTC are currently taking additional steps to strengthen their 

ability to combat slamming and cramming.

Increases in Slamming 

and Cramming 

Complaints to State 

and Federal 

Authorities

As indicated in table 1, state public utilities commissions and federal 

agencies reported overall increases in slamming and cramming complaints 

from 1996 through 1998. The total number of slamming complaints 

received at the state level rose from 20,741 to 39,688 (a 91-percent 

increase), while the number of written complaints received by FCC rose 

from 12,795 to 20,154 (a 57-percent increase).3

 Although FCC saw a small 

decrease in slamming complaints from 1997 through 1998, the number was 

still considerably higher in 1998 than in 1996. During the same period, the 

number of cramming complaints received by state and federal agencies 

increased dramatically. In 1997, public utilities commissions in 16 states 

received 1,188 cramming complaints. By the end of 1998, however, the 

commissions in 36 states had received 19,543 complaints. The situation is 

similar at the federal level. FCC and FTC saw cramming emerge as a major 

problem in 1998, as the number of cramming complaints to both agencies 

sharply increased from 1997 to 1998. In 1998, cramming became the fourth 

most common cause of written complaints received by FCC and the second 

most common cause of complaints received by FTC.4

3

Nine state public utilities commissions reported that they did not have records that tracked the 

complaints they received about slamming and cramming. These states are Alaska, Arkansas, Colorado, 

Delaware, Hawaii, Indiana, Louisiana, Rhode Island, and South Carolina.

4

The data in table 1 have some important qualifications. The complaint numbers do not equate to 

verified slamming and cramming incidents, since a complaint could prove upon investigation to be 

unwarranted. For example, a customer might misinterpret a legitimate service charge and mistakenly 

complain about being slammed or crammed. Furthermore, adding state and federal complaint numbers 

together would result in some double-counting because consumers can complain to both state and 

federal authorities about a single slamming or cramming incident.
B-281703

Page 6 GAO/RCED-99-193 Telephone Slamming and Cramming

Table 1: Number of Telephone Slamming and Cramming Complaints Reported to State Public Utilities Commissions, FCC, and 

FTC for Calendar Years 1996-98

a

A consumer may call FCC’s National Call Center with either an inquiry or a complaint. While FCC 

keeps track of inquiries and complaints received by the Call Center for trend and analytical purposes, it 

did not, until recently, take action until a consumer had submitted a written complaint, accompanied by 

bills and any other supporting documentation. These FCC numbers reflect written complaints only.

b

The numbers for FTC include complaints received by mail, telephone, and the Internet. FTC also 

receives slamming complaints, which it shares with FCC.

Sources: State public utilities commissions’ responses to GAO’s survey and data from FCC and FTC.

The numbers in table 1 do not capture complaints about slamming and 

cramming that consumers tried to resolve by dealing directly with their 

telephone company without filing a complaint with state or federal 

authorities. Regional Bell operating companies reported to us that 

altogether they received well over 1 million unverified complaints in 1998 

about long-distance and toll-service slamming.5

 Data from two of the 

companies indicated that the number of complaints was declining. Major 

long-distance companies reported a far smaller number of unverified 

complaints against them during 1998, though data associated with their 

resellers were not always included.6

 Most of the long-distance companies 

indicated that the number of unverified slamming complaints against them 

had increased to some degree from 1996 to 1998.

We were also able to obtain some data from the regional Bell operating 

companies and two long-distance companies on the number of cramming 

Slamming Cramming

Calendar years

Complaints

received by state

public utilities

commissions

Written

complaints

received

by FCCa

Complaints

received by state

public utilities

commissions

Written

complaints

received

by FCCa

Complaints

received

by FTCb

1996 20,741 12,795 852 0 221

1997 25,809 20,475 1,188 0 3,173

1998 39,688 20,154 19,543 4,558 9,827

5

The companies we contacted consider the slamming and cramming data provided to us to be 

proprietary. To protect the confidentiality of the data, we agreed to report only cumulative totals for all 

companies. The regional companies included Ameritech, Bell Atlantic, BellSouth, SBC 

Telecommunications, and US WEST. The long-distance companies included AT&T, MCI WorldCom, and 

Sprint. We also obtained data from GTE. We did not attempt to gather data from hundreds of smaller 

local and long-distance service providers.

6

A reseller is a telephone service provider that does not own transmission facilities but obtains 

communications services from another telephone company for resale to the public for profit.
B-281703

Page 7 GAO/RCED-99-193 Telephone Slamming and Cramming

complaints they received in 1998. While no regional company had 

cramming data that covered all of 1998, four of them reported a combined 

total of under 160,000 unverified cramming complaints for part of the year, 

with one company showing a steady decline in complaints. A fifth regional 

company reported a substantially higher number of unverified complaints 

for the last 9 months of 1998, but with a generally downward trend. Two 

long-distance companies reported a combined total of fewer than 1,000 

unverified complaints; the others reported having no data on cramming 

complaints.

Consumer Protections 

Against Slamming and 

Cramming

Both the states and the federal government have taken action to help 

protect consumers against slamming and cramming. All states reported 

implementing some consumer protections against slamming, and 40 states 

reported having some protections against the newer problem of cramming. 

Many states are also making efforts to alert consumers to slamming and 

cramming and to provide guidance on dealing with these abuses. At the 

federal level, FCC recently adopted new regulations against slamming 

designed to take the profit out of it. To combat cramming, FCC adopted 

new regulations (“Truth-in-Billing”) in April 1999 that require telephone 

bills to clearly identify all charges and highlight any changes in service so 

that consumers can more easily spot unauthorized charges. FTC also has 

proposed regulatory changes that would address cramming by, among 

other things, requiring a consumer’s express authorization to charge for 

services other than local or long-distance calling, enhancing the consumer’s 

right to dispute unauthorized charges, and imposing liability on those 

engaged in cramming.

State-Level Consumer 

Protections Against 

Slamming and Cramming

All state public utilities commissions reported initiating a variety of 

actions, requirements, and services designed to help protect consumers 

against telephone slamming. The most widely reported action is allowing 

telephone companies to offer consumers the option of “freezing” their 

long-distance service provider—often referred to as a “primary 

interexchange carrier (PIC) freeze.” If a consumer asks the local telephone 

company to place a freeze on his or her account, the telephone service 

provider may not be switched unless the consumer expressly agrees to lift 

the freeze. Other protections include

• requiring a consumer’s local telephone company to have an independent 

third party verify the consumer’s oral authorization to switch to a new 

telephone service provider; 
B-281703

Page 8 GAO/RCED-99-193 Telephone Slamming and Cramming

• requiring a consumer’s local telephone company to obtain from a new 

telephone service provider a form or “letter of agency” indicating in 

writing that the consumer is authorizing a switch; 

• requiring telephone companies to provide consumers with a toll-free 

complaint number; 

• providing a Web site, educational brochures, and public service 

announcements with information on preventing telephone slamming; 

and

• referring complaints to FCC.

In addition, all of the state commissions had procedures in place for 

handling consumers’ complaints about slamming. The commissions either 

resolved a complaint by contacting the consumer and/or the company 

named in the complaint or referred the complaint to the state attorney 

general. In 1998, the commissions informally resolved nearly 60 percent of 

the 39,688 slamming complaints they received by reaching a settlement 

between the consumer and the telephone company, without further 

investigation or administrative hearings. For example, Maryland’s Public 

Service Commission reported that in 1998 it received 259 slamming 

complaints. The Commission resolved all of them informally and helped 

consumers obtain approximately $19,000 in refunds stemming from these 

complaints.

Forty-one state public utilities commissions reported initiating some 

actions to help prevent telephone cramming.7

 These actions included 

providing consumers with educational brochures and information on 

Internet sites and establishing procedures for handling cramming 

complaints. Some state commissions reported that they refer cramming 

complaints to FCC. In addition, a few state commissions reported taking 

additional actions to increase their ability to protect consumers against 

cramming. For example, during 1998, Illinois passed legislation that, in 

part, enhanced the enforcement actions the Illinois Commerce 

Commission can take to protect customers against cramming. Specifically, 

the legislation gave the Commission the authority to fine an offending 

company up to $1,000 for each repeated and intentional cramming violation 

as well as revoke the company’s certificate to provide service in the state. 

In addition, the Tennessee Regulatory Authority implemented new 

7

The public utilities commissions in Alaska, Colorado, the District of Columbia, Iowa, Kentucky, 

Louisiana, Nebraska, New Hampshire, New Jersey, and New Mexico reported initiating no actions to 

help prevent telephone cramming. 
B-281703

Page 9 GAO/RCED-99-193 Telephone Slamming and Cramming

regulations in 1998 against cramming that require the prior consent of an 

authorized individual before charges for additional services can be placed 

on the individual’s telephone bill. The Authority can assess a maximum 

fine of $100 per day, per offense, against a company engaging in cramming. 

The California Public Utilities Commission and the Indiana Utility 

Regulatory Commission also recently implemented rules detailing the types 

of information required before charges for other services can be added to a 

consumer’s telephone bill.

Federal Consumer 

Protections Against 

Slamming and Cramming

Both FCC and FTC have undertaken rulemakings to provide greater 

protection against slamming and cramming. They have also increased their 

consumer education efforts and are making it easier for consumers to file 

complaints about these abuses.

New Regulations Against 

Slamming

FCC has taken several steps to deter slamming since the advent of 

competition in long-distance service during the mid-1980s. For example, 

beginning in 1992, FCC established verification procedures for 

long-distance service change-orders generated by telemarketing. When 

slamming persisted, FCC adopted additional rules in 1995 prohibiting the 

potentially deceptive and confusing practice of combining long-distance 

service change authorizations (“letters of agency”) with promotional 

materials, such as sweepstakes entry forms, in the same document. The 

1995 rules also require that letters of agency be written in clear, 

unambiguous language. The enactment of the Telecommunications Act of 

1996, which included a provision prohibiting slamming and imposing 

liability on carriers engaging in this abuse, led FCC to reexamine its rules 

against slamming. Recognizing that its past actions were not sufficient to 

stop slamming, FCC adopted new rules in December 1998 aimed at, among 

other things, taking the profit out of slamming and ensuring that customers 

do not have to pay for services that they did not authorize.8

The new rules have several key features. The scope of the rules takes into 

account that slamming is no longer limited to long-distance service but can 

also occur with in-state toll service and local service as these markets 

become open to competition. FCC therefore explicitly extended its new 

rules to encompass (with limited exceptions) all telephone companies in 

connection with changes in all telecommunications services, not just 

8

“Implementation of the Subscriber Carrier Selection Changes Provisions of the Telecommunications 

Act of 1996,” CC Docket No. 94-129, FCC 98-334 (rel. Dec. 22, 1998) (“Second Order”).
B-281703

Page 10 GAO/RCED-99-193 Telephone Slamming and Cramming

long-distance service. The rules also tighten the methods that telephone 

companies use to verify that changes have been authorized by consumers, 

including eliminating the “welcome package,” a verification option that 

FCC has found to be ineffective.9

 In addition, the rules clarify the method 

by which consumers can order a “freeze” on changes to their existing 

telephone service in order to prevent any unauthorized switches. These 

verification rules became effective on April 27, 1999.

Another key element of the new rules governs consumers’ liability for 

charges made by unauthorized telephone companies. The new rules would 

absolve consumers of liability for any charges imposed by an unauthorized 

telephone company for up to 30 days. If a consumer has already paid the 

unauthorized company for calls made within 30 days of being slammed, the 

unauthorized company would have to remit such payments to the 

consumer’s authorized company, which would then provide the consumer 

with a refund for any amounts paid in excess of the authorized company’s 

rates. The unauthorized company would also pay the authorized company 

for any expenses incurred in restoring the consumer’s service or collecting 

charges from the unauthorized company. 

Unlike the verification rules, these liability rules have not been 

implemented because of court action. FCC recognized that some 

telephone companies desired to establish an independent third-party 

administrator, funded by participating telephone companies, to discharge 

their obligations under the new rules for resolving slamming disputes 

among themselves and consumers, including making adjustments to 

consumers’ telephone bills. FCC therefore delayed the implementation of 

its new liability rules until May 17, 1999 (90 days after the Second Order 

was published in the Federal Register). According to FCC, the delay was 

designed to give the companies time to develop and implement a 

third-party administrator mechanism and file waiver requests. On March 

30, 1999, several long-distance companies submitted a proposal for a 

third-party administrator. They estimated that they would need at least 6 

months to implement the proposal after FCC approved it and therefore 

asked FCC to delay the implementation of the new liability provisions until 

that time. In April, FCC asked for public comments on the proposal with a 

view to reaching a decision by summer 1999 but decided not to further 

9

The “welcome package” was an information package mailed to a consumer after he or she agreed to 

change telephone companies. It included a prepaid postcard that the consumer could use to deny, 

cancel, or confirm the change order.
B-281703

Page 11 GAO/RCED-99-193 Telephone Slamming and Cramming

delay its implementation of the liability provisions. Several long-distance 

companies successfully petitioned the U.S. Court of Appeals for the District 

of Columbia Circuit to order a stay on FCC’s implementation of the new 

liability rules. The stay, granted on May 18, 1999, is for an indefinite period. 

As yet, it is not clear when this issue will be resolved.

Additional antislamming steps are being considered by FCC. In its new 

rules, FCC asked for public comment on several actions that could lead to 

further rulemaking, including

• allowing both the authorized telephone company and the consumer to 

recover any charges the consumer paid to the unauthorized telephone 

company,

• registering new companies entering the telecommunications market to 

determine whether they have a history of fraudulent activities,

• assigning identifying codes to all telephone companies to make it easier 

to determine which ones are committing slamming violations, and

• requiring telephone companies to report to FCC the number of 

slamming complaints they receive to help FCC take quicker action 

against companies with high complaint rates.

When we concluded our review in June 1999, no additional rules pertaining 

to these issues had been adopted. Several companies have filed petitions 

with FCC to reconsider the Second Order.

New Regulations Against 

Cramming

New federal actions to combat cramming are being taken by both FCC and 

FTC. According to FCC, over 60,000 consumers made inquiries at the 

agency in 1998 about the confusing format of their telephone bills. FCC 

believes that this confusion is contributing to the rise in cramming because 

consumers are having difficulty detecting unauthorized charges. On April 

15, 1999, FCC adopted its “Truth-in-Billing” order, which establishes 

principles and guidelines to make telephone bills easier for customers to 

understand.10 The new rules, which FTC commented on and supports, 

require that telephone bills (1) clearly identify who is responsible for each 

charge, (2) contain full and nonmisleading descriptions of the services 

being billed, and (3) provide telephone numbers for consumers to call for 

more information about specific charges on their bills. In addition, any 

changes in the telephone service provider—whether local or 

long-distance—must be highlighted, along with the name of the new 

10“Truth-in-Billing and Billing Format,” CC Docket No. 98-170, FCC 99-72 (rel. May 11, 1999).
B-281703

Page 12 GAO/RCED-99-193 Telephone Slamming and Cramming

company, when this information first appears on the bill. These changes 

should also make it easier for consumers to detect slamming, since a 

change in the telephone service provider would also be highlighted on the 

bill. 

FTC is proposing direct action to combat cramming. Under the proposed 

revision to its “Pay-per-Call” rule, FTC has suggested a fourfold approach to 

the problem of cramming.11 First, a consumer’s express authorization 

generally would be required for purchases unrelated to local or 

long-distance telephone service that are billed to the consumer’s telephone 

account. Second, a vendor would be prohibited from placing monthly or 

other recurring charges for pay-per-call service on a telephone bill without 

prior agreement with the customer billed for the service. Third, consumers 

would have the legal right to dispute unauthorized charges “crammed” onto 

their telephone bills and to have these charges removed. Finally, dispute 

resolution protections would be provided for all transactions that resulted 

in the placement of nontoll charges on a customer’s telephone bill. 

Violators would be liable for civil penalties, currently $11,000 per violation. 

FTC officials expect to issue a final rule before the end of 1999.

Complaint Reporting and 

Education Initiatives

FCC and FTC are augmenting their regulatory efforts with expanded 

consumer outreach and education, which they believe are key elements in 

combating slamming and cramming. FCC is making it easier for consumers 

to submit complaints about slamming and cramming. In the past, FCC 

required consumers to submit complaints in writing before it took action 

on them. Since January 1999, consumers have been able to file complaints 

electronically via FCC’s Internet Web site. And in June 1999, operators at 

FCC’s National Call Center started taking consumers’ complaints over the 

telephone and electronically submitting them for action directly to FCC’s 

Common Carrier Bureau. In response to each complaint, the Bureau 

electronically issues an “Official Notice of Informal Complaint” to all

companies identified in the complaint.12 A served company has 30 days to 

11Under the authority of the Telephone Disclosure and Dispute Resolution Act of 1992, FTC adopted its 

Pay-per-Call rule to curtail the unfair and deceptive practices engaged in by some pay-per-call 

businesses. 16 C.F.R. part 308. At that time, pay-per-call services were generally provided via “900” 

numbers that were billed directly to a consumer’s local telephone company. Since then, 

“telephone-billed purchases” have expanded beyond simply “900” numbers. The Telecommunications 

Act of 1996 authorized FTC, through its rule, to extend the definition of the term “pay-per-call service.” 

On Oct. 30, 1998, FTC published a notice of proposed rulemaking to revise the rule. 63 Fed. Reg. 58524. 

Part of this revision focuses on cramming.

12The issuance of a notice of informal complaint does not necessarily indicate wrongdoing by the served 

company.
B-281703

Page 13 GAO/RCED-99-193 Telephone Slamming and Cramming

respond to FCC. FCC is also automating some of its old manual processes 

for handling consumers’ complaints in order to shorten its response time. 

With the help of this new system and additional staff, FCC hopes that its 

April 1999 backlog of 10,733 written complaints about slamming will be 

eliminated by the end of this year. In addition, FCC is bolstering its 

customer education efforts by making information on slamming and 

cramming available on its public Internet Web site. FCC is also proposing 

to establish a centralized Public Information Bureau to be more responsive 

to consumers’ concerns and requests for information. 

FTC has expanded its efforts to educate consumers about telephone billing 

abuses by creating a Web page on cramming and has formed a 

telecommunications working group to develop consumer education 

publications. These materials emphasize that a consumer does not owe for 

unauthorized (crammed) services just because the call for the service may 

have been placed from his or her home. In 1999, FTC added a toll-free 

number for consumers to call with complaints about cramming and other 

abuses and to obtain information on how to avoid such problems. FTC’s 

database system, called the Consumer Sentinel, also contains details on 

over 180,000 complaints from consumers on all topics, including complaint 

data provided by sources such as Better Business bureaus, state attorneys 

general, the National Fraud Information Center, Phone Busters, and private 

companies. FTC uses the database to develop enforcement strategies 

against companies engaged in abusive trade practices, including 

cramming.13

State and Federal 

Enforcement Actions 

Against Slamming and 

Cramming

Both state and federal enforcement actions against companies engaged in 

slamming and cramming have resulted in financial penalties, restitution, 

and discontinued operations. At both the state and federal levels, the bulk 

of actions from 1996 through 1998 were for slamming violations.

State Enforcement Actions As a whole, the states have successfully completed a large number of 

enforcement actions against slamming and cramming that have resulted in 

substantial fines and other penalties. For 1996 through 1998, the public 

13Over 170 law enforcement agencies in the United States and Canada also have access to this database 

to assist them in their own consumer protection efforts.
B-281703

Page 14 GAO/RCED-99-193 Telephone Slamming and Cramming

utilities commissions and offices of attorney general in 35 states reported 

completing a total of 219 enforcement actions against companies that 

engaged in slamming or cramming.14 In each of these cases, the public 

utilities commission and/or office of attorney general participated in a 

formal hearing against the company that resulted in a final disposition or 

resolution of the case. Appendix I provides more detailed information 

about each state’s completed enforcement actions.

Of the 219 completed state enforcement actions, 194 were against 

companies or individuals involved in slamming, while 25 were against 

companies or individuals involved in cramming. In most of these actions, 

the company or individual was ordered to resolve the complaint by 

providing the consumer with some restitution, paying a penalty, or 

providing an assurance that the slamming or cramming would stop. In 30 

of the 219 enforcement actions, the state public utilities commission and/or 

attorney general issued a cease-and-desist order or suspended or revoked 

the company’s authority to do business in the state.

As shown in table 2, the states ordered companies to pay at least $13.4 

million in customer restitution15 and $14.1 million in penalties and fines.16 

These completed enforcement actions affected at least 397,765 consumers. 

These totals, however, understate the actual outcomes of these actions 

because the state public utilities commissions and attorneys general did 

not always include in their survey responses the number of consumers 

affected or the amount of customer restitution and penalties involved.

14Oregon’s Office of Attorney General reported completing one enforcement action that involved both 

slamming and cramming violations. For the purpose of this report, this enforcement action was 

counted as a slamming violation.

15Customer restitution can include a complete or partial refund of a consumer’s long-distance charges 

and of the fees charged to switch the consumer back to his or her authorized long-distance provider.

16Penalties and fines include charges to cover the costs of court proceedings and investigations. In 

some cases, the penalties and fines were used to cover the costs of consumer education campaigns.
B-281703

Page 15 GAO/RCED-99-193 Telephone Slamming and Cramming

Table 2: Completed Enforcement Actions Taken by State Public Utilities 

Commissions and State Attorneys General fo rSlamming and Cramming Violations, 

1996-98

a

The survey responses did not include the number of customers affected in 86 of the 219 reported 

enforcement actions.

b

The survey responses did not include the amount of customer restitution ordered to be paid in 77 of 

the 219 reported enforcement actions.

c The survey responses did not include the amount of penalties ordered to be paid in 34 of the 219 

reported enforcement actions. 

Sources: State public utilities commissions’ responses to GAO’s survey and responses of state 

attorneys general to a survey from the National Association of Attorneys General.

Fourteen state public utilities commissions reported initiating a substantial 

number of enforcement actions during calendar years 1996 through 1998 

that had not been finalized as of early 1999.17 Specifically, over 3,900 

enforcement actions were initiated against companies or individuals 

engaged in slamming or cramming. The state attorneys general were not 

asked to provide information on pending enforcement actions. The 

attorneys general in 10 states, however, reported that 20 slamming and 17 

cramming enforcement actions were pending resolution.18

Public utilities commissions Attorneys general

Slamming Cramming Slamming Cramming

Number of completed 

enforcement actions 

reported

99 6 95 19

Number of customers 

affecteda

345,420 30,003 10,216 12,126

Amount of penalties and 

finesb

$7,324,987 $1,016,000 $4,932,587 $827,350

Amount of customer 

restitutionc

$5,625,564 $500,808 $6,045,511 $1,192,400

17 The state public utilities commissions in Alabama, Connecticut, Florida, Georgia, Louisiana, Maine, 

Mississippi, Missouri, New York, Pennsylvania, Tennessee, Texas, Vermont, and West Virginia reported 

the pending enforcement actions.

18 The state attorneys general in Arkansas, Arizona, Connecticut, Illinois, Missouri, New Jersey, Ohio, 

Pennsylvania, Vermont, and Wisconsin reported the pending enforcement actions. Illinois’ Office of 

Attorney General reported the largest number of enforcement actions pending resolution—11 

slamming actions and 10 cramming actions.
B-281703

Page 16 GAO/RCED-99-193 Telephone Slamming and Cramming

Federal Enforcement 

Actions

FCC and FTC operate under different statutory schemes and generally have 

different remedies available.19 However, both of these agencies maintain 

that strong enforcement actions are necessary to send a clear message to 

the industry that slamming and cramming will not be tolerated. As a 

regulatory agency, FCC has several tools for achieving its enforcement 

goals. These include administrative remedies, such as revoking a 

company’s operating authority, issuing a cease and desist order, and 

assessing a civil monetary penalty (forfeiture). As a law enforcement 

agency, FTC pursues cramming in federal district courts, seeking 

temporary and permanent injunctive relief, and, ultimately, restitution to 

affected customers. FTC can also take administrative enforcement action, 

such as convening a trial before an administrative law judge. 

From its first slamming enforcement action in 1994 through the end of 

1998, FCC took 23 enforcement actions against slamming, resulting in a 

total of $17.1 million in proposed forfeitures. 20 As of June 1999, FCC had 

collected $2.6 million of the proposed forfeitures in 12 of these actions. 

Companies in four actions filed for bankruptcy, and five others are now in 

settlement negotiations with FCC. Settlement agreements generally 

include both a payment and consumer protections. In addition, in 1996 and 

1997, FCC took two actions against one individual, Daniel Fletcher, for $5.8 

million in forfeitures for slamming activities by eight of the companies that 

he apparently owned and operated. When he did not pay the $5.8 million in 

forfeitures, FCC in 1998 referred the cases against him to the Department 

of Justice for collection under the Communications Act. FCC also revoked 

the operating authority of the eight companies to ensure that none of them 

could resume operations and once again engage in slamming. Appendix II 

provides additional details on all 23 FCC actions.

19Under the Communications Act of 1934, as amended, FCC has explicit statutory authority over 

slamming and general authority to prohibit carriers that provide interstate services (telephone 

companies) from engaging in unjust and unreasonable practices, such as cramming. 47 U.S.C. 258; 47 

U.S.C. 201(b). FTC, under the Federal Trade Commission Act, as amended, has the authority to pursue 

law enforcement actions against unfair and deceptive acts or practices. 15 U.S.C. 45(a). Common 

carriers (telephone companies) subject to the Communications Act of 1934, as amended, are exempt 

from FTC’s statutory mandate under the Federal Trade Commission Act. 15 U.S.C. 45(a)(2). FTC has 

taken the position that the statutory common-carrier exemption does not shield the 

non-common-carrier activities of an entity that may otherwise engage in some common-carrier 

activities under another statute.

20One of these actions, against Long Distance Direct, Inc., was for both slamming and cramming 

violations. 
B-281703

Page 17 GAO/RCED-99-193 Telephone Slamming and Cramming

According to FCC officials, prior to 1998, FCC’s enforcement actions 

initiated against companies with slamming violations usually resulted in 

assessments of $80,000 or less. And most of these actions resulted in even 

smaller settlement amounts. Two exceptions were actions against Cherry 

Communications and Operator Communications, taken in 1994 and 1995, 

respectively; both companies paid $500,000 each. During 1998, FCC 

consistently assessed amounts greater than $1 million for slamming 

violations. The five actions that it initiated in 1998 resulted in $7,920,000 in 

proposed forfeitures. FCC officials stated that the forfeiture amounts were 

increased in 1998 so that companies would not view them simply as a “cost 

of doing business.” The officials noted that although companies paid 

smaller forfeitures in the past, they did not necessarily change their 

business practices to conform to FCC’s regulations. FCC’s goal in imposing 

the higher amounts is to send a message to the industry that slamming will 

not be tolerated. It is not yet clear how much of the higher forfeitures will 

ultimately be paid. As of May 1999, none of the companies involved in the 

1998 enforcement actions had settled with FCC or made any payments.

In addition, the FCC Chairman has proposed consolidating the agency’s 

enforcement functions into an enforcement bureau. According to FCC, a 

centralized bureau would be more efficient in conducting investigations 

and enforcement actions in light of the proliferation in the types and 

number of telecommunications services. FCC hopes to have the new 

bureau operational in fiscal year 2000. 

As a result of FTC’s efforts to combat cramming, seven cases have been 

brought to court since April 1998.21 These cases involve 36 defendants (16 

companies and 20 individuals), including billing aggregators and vendors. 

In six cases, FTC has sought and successfully obtained preliminary or 

permanent injunctions and temporary restraining orders to stop these 

companies’ cramming activities.

In addition, FTC is seeking restitution for the unauthorized charges that 

these companies collected from consumers. According to FTC officials, 

these unauthorized charges range from $4.7 million in one case to almost 

$40 million in another case. Of the seven cases brought to district court, 

one has resulted in approximately $13 million in consumer restitution and 

compliance provisions, including a 3-year record-keeping requirement for 

21FTC’s report Fighting Consumer Fraud: The Case Against Cramming (June 1999) discusses FTC’s 

enforcement actions against cramming in detail.
B-281703

Page 18 GAO/RCED-99-193 Telephone Slamming and Cramming

the company. The parties in another case have agreed to $39.7 million in 

consumer restitution and changes in their business practices. The other 

five cases were still in various stages of discovery and negotiation as of 

June 1999. Additional details on these cases are found in appendix II.

Officials at both FCC and FTC told us that they have several additional 

investigations in progress, including one joint investigation. They expect to 

take more enforcement actions against slamming and cramming before the 

end of this year.

Companies With the Highest 

Number of State and 

Federal Enforcement 

Actions

Several companies listed in appendix II have been the subject of 

enforcement actions by several states and the federal government. Table 3 

lists 14 companies that have been subject to four or more state 

enforcement actions for slamming.22 Eight of these 14 companies have also 

been subject to enforcement actions by FCC.

22 These state enforcement actions include reported actions that have both been resolved and are 

pending final resolution.
B-281703

Page 19 GAO/RCED-99-193 Telephone Slamming and Cramming

Table 3: Companies Subject to the Highest Number of State a ndFederal Enforcement Actions for Slamming, Calen d arYears 

1996-98

a No federal action taken.

Name of company

States that 

took action

Total number

of consumers

affected at

the state level

Total restitution

and penalties

ordered

by states

Federal

agency that

took action

Total federal

forfeitures/

payments

made by

company

Minimum Rate Pricing, 

Inc.

22 states: AL, AR, 

AZ, GA, IA, ID, KS, 

MI, MN, MS, NC, NJ, 

NY, OH, OR, PA, RI, 

SC, VA, VT, WA, WI 

1,202 $812,802 FCC $1.2 million

Business Discount 

Plan, Inc.

16 states: AL, AR, 

CT, FL, GA, ID, IL, 

MO, MS, NC, NJ, NY, 

OK, OR, PA, VT

1,354 $283,040 FCC $2.4 millionb

EqualNet Corp. 11 states: AR, AZ, 

CA, ID, KS, MI, NC, 

NJ, OR, TN, WI

1,596 $210,816 a a

Heartline 

Communications, Inc.

8 states: AZ, CA, 

FL, IL, LA, NJ, NY, 

TN, TX 

32,696 $1,087,500 FCC $200,000c

National Accounts, Inc. 7 states: ID, IL, KS, 

MI, NJ, TN, WI

61 $429,000 a a

MCI 7 states: FL, NC, NY, 

OR, SD, TX, VT

754 $1,727,872 FCC $30,000

Winstar Gateway 

Network, Inc.

6 states: CA, ID, IL, 

NJ, TN, WI

13,030 $148,000 FCC $80,000

AT&T 6 states: CT, FL, NC, 

NY, OK, TX

1,004 $331,510 FCC $30,000

Least Cost Routing, Inc. 5 states: FL, ID, IL, 

LA, OR

252 $235,000 a a

Long Distance 

Services, Inc.

5 states: AL, FL, 

GA, MI, NY

1,435 $16,000 FCC $80,000b

The Furst Group, Inc. 5 states: CA, FL, 

KS, NJ, OR 

197 $152,500 a a

Axces, Inc. 4 states: IL, MO, OK, 

TX

88 $115,500 a a

Communications 

Telesystems 

International, Inc.

4 states: AZ, IL, NM, 

TX

208 $1,997,281 a a

Phone Calls, Inc. 4 states: FL, LA, NY, 

SC 

665 $861,000 FCC $1,793,900b,d

(notes continued) )
B-281703

Page 20 GAO/RCED-99-193 Telephone Slamming and Cramming

b

This is a proposed forfeiture amount.

c FCC is planning to rescind this forfeiture because Heartline filed Chapter 7 bankruptcy before 

reaching an agreement with FCC.

d

FCC proposed this forfeiture amount against Phone Calls as part of the enforcement action it took 

against eight companies owned by Daniel Fletcher.

Sources: Surveys of state public utilities commissions and state attorneys general and data from FCC.

As for cramming, the survey results indicated that two companies, Veterans 

of America Association, Ltd., and Coral Communications, Inc., were the 

subject of enforcement actions for cramming by four or more states during 

calendar years 1996 through 1998. The states that took actions against 

these companies were Florida, Idaho, Illinois, Missouri, New Jersey, New 

York, Oregon, and Pennsylvania. These actions affected 136 customers and 

resulted in $106,600 in restitution and penalties. FTC also took action 

against Veterans of America Association, Ltd., and is currently seeking $4.7 

million in customer restitution.

Both FCC and FTC officials told us that they are working with their state 

counterparts to efficiently combat slamming and cramming. To achieve 

this goal, the two agencies share complaint data with each other and the 

states. FCC and the National Association of Regulatory Utility 

Commissioners are also working to coordinate their enforcement actions 

and jointly disseminate educational materials on telecommunications 

issues affecting consumers. Both FCC and FTC officials told us that they 

regularly participate in conference calls with representatives of the state 

public utilities commissions and offices of attorney general, respectively, to 

discuss telecommunications issues, including slamming and cramming.

FCC and FTC officials also told us that they are working with members of 

the telecommunications industry to curb these abuses. For example, in 

May 1998, FCC sponsored a workshop, attended by representatives of the 

telephone industry, to develop a set of guidelines on “best practices” in 

combating cramming that individual companies could implement 

independently. These best practices cover issues such as screening 

products and service providers to identify programs that may be deceptive 

or misleading, establishing procedures for verifying that charges have been 

authorized by the consumer, and establishing a dispute resolution process. 

Several major local and long-distance telephone companies provided us 

with examples of actions they are taking to curb slamming and cramming, 

which are listed in appendix III. In addition, FTC has sponsored public 

workshops with telecommunications representatives, consumer groups, 

FCC officials, the National Association of Attorneys General, and others to 

address cramming and provide additional consumer education.
B-281703

Page 21 GAO/RCED-99-193 Telephone Slamming and Cramming

Scope and 

Methodology

To determine the states’ actions to combat telephone slamming and 

cramming, we administered a survey to the public utilities commissions in 

the 50 states and the District of Columbia. This survey collected 

information on the types of consumer protections offered by the states, the 

number of slamming and cramming complaints received, and details on 

each of the formal enforcement actions taken by the commissions from 

1996 through 1998. The National Association of Attorneys General 

collected similar information about formal enforcement actions taken by 

each state’s attorney general. We assisted in collecting this information. In 

addition, we reviewed relevant FCC and FTC documents and met with 

officials of these agencies to discuss their efforts in developing regulations 

to combat slamming and cramming and their enforcement actions against 

those engaging in these abuses. We also contacted regional Bell operating 

companies and major long-distance companies for data on slamming and 

cramming complaints and descriptions of their initiatives to curb slamming 

and cramming. We performed our review from December 1998 through 

June 1999 in accordance with generally accepted government auditing 

standards.

Agency Comments We provided a draft of this report to the Federal Communications 

Commission and the Federal Trade Commission for their comment and 

subsequently met with officials from FCC’s Enforcement Bureau and FTC’s 

Bureau of Consumer Protection. Both agencies concurred with our 

findings and provided several points of clarification, which we have 

incorporated into our final report.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days after the 

date of this letter. We will then send copies to interested congressional 

committees; the Honorable William E. Kennard, Chairman of the Federal 

Communications Commission; the Honorable Robert Pitofsky, Chairman of 

the Federal Trade Commission; the other commissioners of FCC and FTC; 

the National Association of Regulatory Utility Commissioners; the National 

Association of Attorneys General; the state public utilities commissions; 

and the state attorneys general. Copies of this report will be made 

available to others upon request.
B-281703

Page 22 GAO/RCED-99-193 Telephone Slamming and Cramming

If you have any questions about our review, please call me at 

(202) 512-7631. Key contributors to this report are listed in appendix IV.

Sincerely yours,

Judy A. England-Joseph

Director, Housing and Community

 Development Issues
Page 23 GAO/RCED-99-193 Telephone Slamming and Cramming
Page 24 GAO/RCED-99-193 Telephone Slamming and Cramming

Contents

Letter 1

Appendix I

Completed 

Enforcement Actions 

Reported by the States, 

Calendar Years 1996-98

26

Appendix II

Federal Enforcement 

Actions Against 

Slamming and 

Cramming

29

FCC’s Enforcement Actions 29

FTC’s Enforcement Actions 32

Appendix III

Telephone Company 

Initiatives to Curb 

Slamming and 

Cramming

36

Examples of Antislamming Initiatives 36

Examples of Anticramming Initiatives 36

Appendix IV

GAO Contact and Staff 

Acknowledgements

38

Tables Table 1: Number of Telephone Slamming and Cramming

Complaints Reported to State Public Utilities Commissions,

FCC, and FTC for Calendar Years 1996-98 6

Table 2: Completed Enforcement Actions Taken by State Public

Utilities Commissions and State Attorneys General for

Slamming and Cramming Violations, 1996-98 15
Contents

Page 25 GAO/RCED-99-193 Telephone Slamming and Cramming

Table 3: Companies Subject to the Highest Number of State

and Federal Enforcement Actions for Slamming, Calendar

Years 1996-98 19

Table I.1: Completed Enforcement Actions Reported by State

Public Utilities Commissions and Offices of Attorney General

for Telephone Slamming and Cramming, Calendar

Years 1996-98 27

Table II.1: FCC’s Enforcement Actions for Slamming Violations,

as of June 1999 30

Table II.2: FTC’s Publicly Filed Cramming Cases, as of June 1999 34

Abbreviations

DOJ Department of Justice

FCC Federal Communications Commission

FTC Federal Trade Commission

NAL notice of apparent liability

PIC primary interexchange carrier

TDDRA Telephone Disclosure and Dispute Resolution
Page 26 GAO/RCED-99-193 Telephone Slamming and Cramming

Appendix I

Completed Enforcement Actions Reported by 

the States, Calendar Years 1996-98 ApenxIdi

All of the public utilities commissions and offices of attorney general in the 

50 states and the District of Columbia responded to our request for detailed 

information on the number of slamming and cramming enforcement 

actions that had reached a final resolution for calendar years 1996-98. This 

information included the number of consumers affected by the 

enforcement actions as well as the amount of customer restitution and 

penalties ordered to be paid. In some cases, the survey respondents were 

unable to provide all of the information. Table I provides a summary of the 

information provided on a state-by-state basis. In the table’s column 

headings, slamming is designated with an “S” and cramming with a “C.”
Appendix I

Completed Enforcement Actions Reported by 

the States, Calendar Years 1996-98

Page 27 GAO/RCED-99-193 Telephone Slamming and Cramming

Table I.1: Completed Enforcement Actions Reported by State Public Utilities Commissions and Offices of Attorney Genera lfor 

Telephone Slamming and Cramming, Calendar Years 1996-98

State

Number of 

completed 

enforcement 

actions 

Number of customers 

affected

Total amount of customer 

restitution reported

Total amount of penalties 

reported

SC S C S C S C

Alabama 6 a 1,705 c $57,450d

Alaska a a

Arizona 5 a 330 $402,306c 303,058d

Arkansas 4 a 7,190 205,631

California 19 2 336,123b 30,000 b 8,078,426c $650,000 5,205,442 $25,000

Colorado a a

Connecticut 1 a 5 c 50,000

Delaware a a

District of Columbia a a

Florida 23 3 2,552 2 18,694 579 2,056,000 21,000

Georgia 4 1 408 b c

Hawaii a a

Idaho 7 1 285 b 5 c c 362,000 d 1,500

Illinois 7 1 566 57 c 5,000 365,000 d 20,000

Indiana a a

Iowa 1 a 98 c 52,631 d

Kansas 9 a 192 c 191,058 d

Kentucky 2 1 1 817 4,000 2,000

Louisiana 6 a b 93,500

Maine a a

Maryland a a

Massachusetts a a

Michigan 4 a 94 c 128,058 d

Minnesota 4 a 7,906 195,633 c 432,000

Mississippi 1 a b 50,000

Missouri 1 2 bb c c d d

Montana a a

Nebraska a a

Nevada a a

New Hampshire a a
Appendix I

Completed Enforcement Actions Reported by 

the States, Calendar Years 1996-98

Page 28 GAO/RCED-99-193 Telephone Slamming and Cramming

a

No completed enforcement actions were reported.

b

The number of customers affected was not provided in at least one of the reported actions.

c

Restitution was ordered to be paid in at least one of the reported actions, but the specific amount was 

not provided.

d

A penalty was ordered to be paid in at least one of the reported actions, but the specific amount was 

not provided.

Sources: Responses of state public utilities commissions to GAO’s survey and of state offices of 

attorney general to a survey by the National Association of Attorneys General.

State

Number of 

completed 

enforcement 

actions 

Number of customers 

affected

Total amount of customer 

restitution reported

Total amount of penalties 

reported

SC S C S C S C

New Jersey 7 ab c $535,927 d

New Mexico 1 a b $308,140 95,000

New York 17 3 3,600 172 300,000 c $67,000 c 116,350 d $129,000

North Carolina 11 1 110 bb c c 53,167 d 273,000

North Dakota a a

Ohio 2 ab c 57,631 d

Oklahoma 6 a 19 34,000

Oregon 14 3 bb 185,500 14,350

Pennsylvania 3 2 94 bb c c 117,600 d 1,002,500

Rhode Island 1 1 23 14 723 400 52,631 35,000

South Carolina 3 a 168

South Dakota 4 1 1,056 1 63,444 229

Tennessee 3 1 7b 11,878 c c 95,427 d 280,000

Texas 8 a 129 b 1,000,000 883,000

Utah a a

Vermont 2 a 50 b 1,292,400 c 185,000

Virginia 1 1 bb c 435,000 52,631 d 15,000

Washington 1 a 115 52,632

West Virginia 1 a b 3,302 39,248

Wisconsin 5 1 bb c 40,000 146,000 25,000

Wyoming a a

Total 194 25 355,636 42,129 $11,671,075 $1,693,208 $12,257,572 $1,843,350
Page 29 GAO/RCED-99-193 Telephone Slamming and Cramming

Appendix II

Federal Enforcement Actions Against 

Slamming and Cramming ApenxIdi

This appendix contains information on 23 enforcement actions taken by 

the Federal Communications Commission (FCC) against companies for 

slamming violations and 7 court cases filed by the Federal Trade 

Commission (FTC) against companies and individuals for cramming 

violations.

FCC’s Enforcement 

Actions

FCC relies on several enforcement mechanisms to deal with slamming and 

cramming by some telephone companies. Civil monetary penalties 

(forfeitures) are used to cause offending companies to change their 

business practices. In 1998, FCC began consistently proposing higher 

penalties so that companies could not treat them simply as a cost of doing 

business. Often, after FCC issues a proposed forfeiture—through a notice 

of apparent liability (NAL)—the telephone company will offer to discuss a 

settlement. If a settlement can be reached, FCC will enter into a consent 

decree with the company that generally includes a voluntary payment to 

the U.S. Treasury and consumer protections. In two slamming cases, FCC 

entered into a consent decree before issuing an NAL. When a settlement 

cannot be reached and a payment is not made, FCC will issue a final 

forfeiture order canceling or reducing the penalty or requiring that it be 

paid. If a payment is not made after this order is issued, collection is turned 

over to the Department of Justice (DOJ).1

FCC can also revoke a company’s or an individual’s operating authority, as 

it did this with several companies engaged in slamming that were 

apparently owned and operated by an individual named Daniel Fletcher. 

Table II.1 provides details on all of the enforcement actions that FCC took 

against specific companies for slamming violations from its first such 

action in 1994 through 1998.

1

DOJ’s collection action will not involve a review of the validity and appropriateness of the final FCC 

order if the forfeiture was assessed after a full evidentiary hearing.
Appendix II

Federal Enforcement Actions Against 

Slamming and Cramming

Page 30 GAO/RCED-99-193 Telephone Slamming and Cramming

Table II.1: FCC’s Enforcement Actions for Slamming Violations, as of June 1999

Company Date of action

Amount of

proposed

forfeiture Resolution Current status

1. Cherry Communications, Inc. Investigation began in 

1/93.

Consent decree adopted 

4/15/94.

a $500,000 payment; 

changes in business 

practices.

Payment of $500,000; 

case is closed.

2. Operator Communications, Inc., 

doing business as Oncor 

Communications, Inc.

NAL adopted 3/29/95.

Consent decree adopted 

9/20/95.

$1,410,000 $500,000 payment; 

changes in business 

practices.

Payment of $500,000; 

case is closed.

3. Excel Telecommunications, Inc. NAL adopted 8/18/95.

Notice of forfeiture 

adopted 6/20/96.

$80,000 FCC denied Excel’s 9/6/95 

petition for reduction of 

forfeiture amount.

Forfeiture of $80,000 

paid.

4. Interstate Savings, Inc. d/b/a ISI 

Telecommunications

NAL adopted 8/18/95.

Order to rescind NAL 

adopted 3/10/97.

$40,000 FCC rescinded 

enforcement action after 

company filed for 

bankruptcy.

Closed.

5. LCI International Worldwide 

Telecommunications (LCI)

NAL adopted 9/15/95.

Consent decree adopted 

8/22/97.

$40,000 $15,000 payment; changes 

in business practices.

$15,000 paid 8/97.

6. TELCAM, Telecommunications 

Company of the Americas, Inc. 

NAL adopted 10/6/95.

Consent decree adopted 

2/13/98.

$40,000 $15,000 payment; changes 

in business practices.

$15,000 paid 2/98.

7. Matrix Telecom, Inc. NAL adopted 12/4/95.

Consent decree adopted 

12/12/96.

$40,000 $30,000 payment; changes 

in business practices.

$30,000 paid 12/96.

8. MCI Telecommunications Corp. NAL adopted 1/19/96.

Consent decree adopted 

5/24/96. 

$80,000 $30,000 payment; changes 

in business practices. 

$30,000 paid 6/96.

9. Home Owners Long Distance, 

Inc. (HOLD) 

NAL adopted 1/19/96.

Consent decree adopted 

3/20/97.

$80,000 $30,000 payment; changes 

in business practices.

$30,000 paid 3/97.

10. AT&T Corporation NAL adopted 1/19/96.

Consent decree adopted 

11/27/96.

$40,000 $30,000 payment; changes 

in marketing and business 

practices.

$30,000 paid 12/96.
Appendix II

Federal Enforcement Actions Against 

Slamming and Cramming

Page 31 GAO/RCED-99-193 Telephone Slamming and Cramming

Company Date of action

Amount of

proposed

forfeiture Resolution Current status

11. Nationwide Long Distance, Inc. NAL adopted 1/19/96.

Consent decree adopted 

1/2/97.

$80,000 $30,000 payment; changes 

in business practices.

Payment referred to DOJ 

for collection; company is 

in Chapter 7 bankruptcy.

12. Target Telecom, Inc. NAL adopted 1/19/96.

Order of forfeiture 

adopted 2/24/98.

$40,000 FCC denied Target’s 

response that forfeiture 

should not be imposed or 

amount should be reduced.

$40,000 paid 2/98.

13. Winstar Gateway Network, Inc. Investigation initiated in 

June 1996.

Consent decree adopted 

11/27/96.

a $80,000 payment; changes 

in business practices and 

consumer redress.

$80,000 paid 12/96.

14. Heartline Communications, Inc. NAL adopted 6/20/96. $200,000 FCC is rescinding 

because Heartline filed 

Chapter 7 bankruptcy 

before reaching an 

agreement with FCC.

15. Long Distance Services, Inc. 

(LDS, Inc.) 

NAL adopted 12/12/96.

Order of forfeiture 

adopted 2/24/98.

$80,000 FCC denied LDS’ petition 

for a reduction of the 

forfeiture. 

Referred to DOJ for 

forfeiture payment as a 

Chapter 11 bankruptcy 

case.

16. Long Distance Services, Inc. 

(LDSI)

 (A Fletcher company)

NAL adopted 12/12/96.

Order of forfeiture 

adopted 5/7/97.

$80,000 LDSI never responded to 

this enforcement action. 

Referred to DOJ for 

collection.

17. CCN, Inc.; Church Discount 

Group, Inc.; Discount Calling Card, 

Inc.; Donation Long Distance, Inc.; 

Long Distance Services, Inc.; 

Monthly Discounts, Inc.; Monthly 

Phone Services, Inc.; and Phone 

Calls, Inc. (aka “Fletcher 

Companies”)

Order to show cause 

and notice of opportunity 

for hearing to determine 

revocation of operating 

authority adopted 

6/12/97.

Order to revoke 

operating authority 

adopted 4/21/98.

$5,681,500

(total for all

eight

companies).

Fletcher never responded 

to this enforcement action.

Referred to DOJ for 

collection.

18. Minimum Rate Pricing, Inc. 

(MRP)

NAL adopted 10/31/97.

Consent decree adopted 

12/16/98.

$80,000

initially;

increased to

$1.2 million

as result of

other

slamming

violations

.

$1.2 million payment; 

changes in business 

practices.

MRP is currently paying 

$1.2 million in 

installments.
Appendix II

Federal Enforcement Actions Against 

Slamming and Cramming

Page 32 GAO/RCED-99-193 Telephone Slamming and Cramming

a

FCC did not issue NALs for these companies. Instead, FCC directly entered into consent decree 

negotiations with these companies.

b

The NAL for Long Distance Direct, Inc., was also for cramming violations. All other NALs were only for 

slamming violations.

Source: FCC.

FTC’s Enforcement 

Actions

FTC protects consumers by taking law enforcement actions against unfair 

or deceptive acts or practices.2 According to FTC officials, the Telephone 

Disclosure and Dispute Resolution Act (TDDRA) of 1992, as amended, 

gives FTC the authority to regulate all “telephone-billed purchases” that 

are distinct from charges for the transmission of local or long-distance 

telephone calls.3

 FTC seeks and obtains temporary restraining orders, 

preliminary injunctions, permanent injunctions, and other equitable relief, 

Company Date of action

Amount of

proposed

forfeiture Resolution Current status

19. All American Telephone 

Company, Inc. (AAT)

NAL adopted 7/6/98. $1,040,000 Company has filed a 

response with FCC; 

resolution not yet 

determined.

Open. U.S. Attorney’s 

Office has asked FCC to 

stay its proceedings. With 

FCC’s cooperation, 

federal search warrants 

were issued to AAT.

20. Amer-I-Net Services 

Corporation

NAL adopted 10/26/98. $1,360,000 Company has filed 

response with FCC; 

settlement currently under 

discussion.

Open.

21. Brittan Communications 

International Corp.

NAL adopted 10/29/98. $1,120,000 Company has filed 

response with FCC; 

resolution not yet 

determined.

Open.

22. Business Discount Plan, Inc. 

(BDP)

Prior to 1/95, was known as Trans 

National Telephone, Inc. (incorp. in 

8/92).

NAL adopted 12/16/98. $2,400,000 Company has filed 

response with FCC; 

resolution not yet 

determined.

Open.

23. Long Distance Direct, Inc. 

(LDDI) 

(A subsidiary of Long Distance 

Direct Holdings)

NAL adopted 12/16/98.b $2,000,000 LDDI has filed a response; 

settlement currently under 

discussion.

Open.

2

Common carriers (i.e., telephone companies) subject to the Communications Act of 1934, as amended, 

are exempt from FTC’s statutory mandate under the Federal Trade Commission Act. 15 U.S.C. 45(a)(2). 

FTC has taken the position that the statutory common-carrier exemption does not shield the 

non-common-carrier activities of an entity that may otherwise engage in some common-carrier 

activities under another statute.
Appendix II

Federal Enforcement Actions Against 

Slamming and Cramming

Page 33 GAO/RCED-99-193 Telephone Slamming and Cramming

such as the appointment of receivers, to halt unfair or deceptive practices 

and to reserve the offending companies’ assets for consumer restitution.

Between April 1998 and June 1999, FTC filed seven cases against 16 

companies and 20 individuals for cramming violations. In some instances, 

FTC entered into court-approved settlements with the company. Table II.2 

provides details on the publicly filed enforcement actions that FTC took 

during this period.

3

Under TDDRA, the term “telephone-billed purchase” includes any purchase that is completed solely as 

a consequence of the completion of a telephone call, or subsequent dialing or comparable action of the 

caller. The term specifically excludes all “local exchange” or interexchange telephone service.
Appendix II

Federal Enforcement Actions Against 

Slamming and Cramming

Page 34 GAO/RCED-99-193 Telephone Slamming and Cramming

Table II.2: FTC’s Publicly Filed Cramming Cases, as of June 1999

Company Date of action

Amount of suspect 

billing Status

Comment/additional 

information

Interactive Audiotext 

Services, Inc. Includes 

American Billing and 

Collection Services; U.S. 

Interstate Distributing, 

Inc.; Allstate 

Communications (parent 

company).

4/22/98, in U.S. District 

Court for the Central 

District of California; 

amended filing on 

5/28/98.

$13 million Permanent injunction; $13 

million in restitution to 

consumers.

Settlement entered as 

final order; redress phase 

under way and changes 

required in business 

practices.

International Telemedia 

Associates, Inc. (ITA); 

and Online Consulting 

Group (vendor for ITA). 

7/10/98, in U.S. District 

Court for the Northern 

District of Georgia.

$17.1 million Temporary restraining 

order with freezing of 

Online’s assets and 

preliminary injunction; 

receiver appointed to 

manage Online.

Trustee appointed for ITA 

by a bankruptcy court; ITA 

closed down and its 

business affairs being 

wound up by the trustee. 

Online being closed by 

receiver after receiver 

decided it could not be run 

as lawful business.

Hold Billing Services, 

Ltd.; HBS, Inc.; Avery 

Communications (all 

closely related companies 

that are aggregators); and 

Veterans of America 

Association, Ltd. (VOAA) 

(vendor).

7/16/98, in U.S. District 

Court for the Western 

District of Texas.

$4.7 million Preliminary injunction on 

8/24/98.

Settlement negotiations 

ongoing. VOAA’s 

business closed and 

negotiations with VOAA 

and principals ongoing.

Communications 

Concepts and 

Investments, Inc. d/b/a 

Crown Communications & 

Crown Communications 

Two, Inc.; and Global 

Collections, Inc. (Crown’s 

in-house collection 

agency).

12/22/98, in U.S. District 

Court for the Southern 

District of Florida.

Not yet determined; 

formal discovery under 

way.

Not yet determined. Formal discovery and 

negotiations under way.

Shared Network 

Services, LLC, doing 

business as Shared 

Network Services and 1st

Page

6/7/99 in U.S. District 

Court for the Eastern 

District of California.

Not yet determined. Stipulated preliminary 

injunction; discovery 

under way.

Resolution not yet 

determined.

Wazzu Corporation 6/7/99 in U.S. District 

Court for the Central 

District of California.

Not yet determined. Temporary restraining 

order; discovery under 

way.

Resolution not yet 

determined.

Lert
Appendix II

Federal Enforcement Actions Against 

Slamming and Cramming

Page 35 GAO/RCED-99-193 Telephone Slamming and Cramming

Source: FTC.

Company Date of action

Amount of suspect 

billing Status

Comment/additional 

information

American Telnet, Inc. 6/8/99, in U.S. District 

Court for the Southern 

District of Florida.

$39.7 million Permanent injunction; 

complaint and consent 

filed together, awaiting 

entry by court.

$39.7 million in forgiven 

charges and redress to 

consumers agreed to by 

parties; changes to 

business practices 

required.
Page 36 GAO/RCED-99-193 Telephone Slamming and Cramming

Appendix III

Telephone Company Initiatives to Curb 

Slamming and Cramming ApenxIdi

Several major local and long-distance companies provided us with 

information on initiatives they have undertaken in response to the 

problems of slamming and cramming. The two following lists are not a 

complete inventory of the industry’s initiatives, nor we did attempt to 

assess their effectiveness. They do, however, give some indication of the 

range of actions that telephone companies are taking to curb these abuses.

Examples of 

Antislamming 

Initiatives

• Using brochures, press releases, and Web sites to educate consumers on 

what constitutes slamming, what their rights are, and what steps they 

can take if they have been slammed.

• Suspending the use of outside sales agents for certain marketing efforts 

that have resulted in an unacceptable level of complaints about 

slamming.

• Allowing customers to block changes to their telephone accounts.

• Using automatically dialed, prerecorded calls to notify customers when 

their service provider is changed. 

• Providing toll-free numbers for customers to call to resolve complaints 

about slamming.

• Charging the company’s resellers for the cost of handling slamming 

incidents that they caused.1

Examples of 

Anticramming 

Initiatives

• Using brochures, press releases, and Web sites to educate customers on 

what constitutes cramming, what their rights are, and what steps they 

can take if they have been victims of cramming.

• Limiting billing to vendors engaged in telecommunications-related 

services.

• Eliminating billing for certain products and services susceptible to 

abuse by third-party service providers, such as prepaid calling cards and 

debit cards.

• Eliminating billing for recurring monthly service charges associated 

with pay-per-call 900 number services or charges for services accessed 

via 800 and 888 numbers, which are widely associated in the public’s 

mind with toll-free calling.

• Refusing to bill on behalf of programs that use sweepstakes or “check 

box” methods to sign up customers.

1

A reseller is a telephone service provider that does not own transmission facilities but obtains 

communications services from another telephone company for resale to the public for profit.
Appendix III

Telephone Company Initiatives to Curb 

Slamming and Cramming

Page 37 GAO/RCED-99-193 Telephone Slamming and Cramming

• Requiring information providers to provide clearer billing descriptions, 

toll-free numbers for complaints, and procedures for handling 

complaints.

• Requiring information providers to provide a notarized affidavit 

attesting to the validity of their descriptions and billings; requiring 

billing aggregators that submit bills on behalf of third-party service 

providers to sign an affidavit certifying that the third-party charges were 

authorized by the customer.

• Requiring information providers to block further charges to a 

consumer’s account if requested by the consumer.

• Discontinuing billing for information providers who generate too many 

complaints from customers about cramming.

• Providing customers with the option of blocking the inclusion of 

“miscellaneous” changes on their telephone bills.
Page 38 GAO/RCED-99-193 Telephone Slamming and Cramming

Appendix IV

GAO Contact and Staff Acknowledgements ApenxIVdi

GAO Contact John P. Finedore, (202) 512-6248

Acknowledgements Other key contributors to this report are Martha Chow, Alice Feldesman, 

Mitchell Karpman, Teresa R. Russell, Michael R. Volpe, and Mindi 

Weisenbloom.

(385784) Lert
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the 

following address, accompanied by a check or money order made 

out to the Superintendent of Documents, when necessary, VISA and 

MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address are 

discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000

or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and 

testimony. To receive facsimile copies of the daily list or any list 

from the past 30 days, please call (202) 512-6000 using a touchtone 

phone. A recorded menu will provide information on how to obtain 

these lists.

For information on how to access GAO reports on the INTERNET, 

send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at: 

http://www.gao.gov
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. GI00