The Federal Trade Commission on Tuesday adopted rules requiring companies that offer 900 number pay-per-call services to inform consumers about the costs of the calls and give them a chance to hang up before being charged.
The rules also set ground rules for resolving pay-per-call disputes and restrict non-educational 900 services directed at children.
The regulations implement a 1992 federal law enacted to protect consumers using pay-per-call information services, which have a long history of abuse. Industry and consumer groups generally praised the rules, which contained few surprises.
For the Record
Los Angeles Times Thursday July 29, 1993 Home Edition Business Part D Page 2 Column 6 Financial Desk 2 inches; 42 words Type of Material: Correction
Pay-Per-Call Rules--Under the Federal Trade Commission's new pay-per-call rules, providers of 900 number services are required to begin calls with a statement about costs and the provider when the call's total cost could exceed $2. A story in Wednesday's editions misstated the cost threshold.
However, pay-per-call industry representatives expressed concern that the FTC's rules allow states to adopt stronger measures in some areas, raising the possibility of patchwork regulation.
The 900 number industry boomed through the late 1980s, offering a variety of services from horoscopes and weather reports to medical advice. There was also a surge in complaints from consumers who did not understand the cost of 900 services, as high as several dollars per minute.
Many crooked operators have already left the business in anticipation of the FTC's rules. Revenue from 900 lines slid last year to $550 million from a peak of $880 million in 1991, according to one estimate. Revenue this year is not expected to exceed $580 million, as the industry makes the transition from tabloid-style offerings to information services.
"The regulations have already started to work and forced the handful of bad actors out," said William Burrington, executive director of Washington-based National Assn. for Information Services, an industry group whose members include cable television channels, newspapers and regional telephone companies engaged in 900 services.
The FTC's rules, which take effect in November, expand Federal Communications Commission regulations announced last week. Congress split authority over 900 lines between the two agencies.
The FTC's rules require companies advertising pay-per-call services to display the cost in type that is at least half the size of the telephone number. Television ads must display charges next to the phone number, and radio ads must state the charges.
Under the new rules, 900 services that cost more than $2 for the first minute must begin with a preamble that identifies the company providing the service and the cost of the call. The preamble also must inform the caller that charges will begin three seconds after the tone following the preamble.
The FTC's rules prohibit advertising of 900 services directed at children under 12, unless the services are educational and intended for school study. The rule is expected to eliminate the 900 lines to Santa Claus that crop up every holiday season.
The rules also give companies 90 days to resolve billing disputes either by correcting inaccurate bills, notifying customers that an investigation is underway, or rejecting the complaint and demanding payment. The 900 company must acknowledge complaints within 40 days.
The rules generally prohibit companies from using 800 lines for pay-per-call services.
Mike Heffer, telephone industry analyst with Consumer Action in San Francisco, said the FTC's rules appear "helpful in protecting consumers." He expressed concern, however, that the exception for educational services would open a loophole to advertising directed at children. And he said he was disappointed that the FTC did not decide to regulate pay-per-call rates, as the California Public Utilities Commission does for intrastate 900 calls.
Industry spokesman Burrington said he was concerned that the FTC's rules allowed states to toughen regulations regarding the preamble. He said that if states come up with their own rules, it will make it difficult for national 900 services companies to operate. Burrington said the industry may ask the FCC to resume regulation of the preamble, which it left to the FTC last week.
The FCC regulations include a requirement that telephone companies block access to 900 numbers from individual phone lines, if so requested by the customer.
They also require phone companies to provide customers with toll-free lines that give information about pay-per-call services. Customers also must be given annual pay-per-call disclosure statements. The FCC rules also prohibit any prefix other than 900 to be used by a pay-per-call service.