The California Public Utilities Commission on Thursday issued its largest fine ever against a long-distance telephone company, charging Qwest Communications Corp. and its subsidiary, LCI International Telecommunications, $20.3 million, plus customer refunds, for questionable marketing practices.
The commission said Denver-based Qwest violated the state’s Public Utilities Code when, primarily in 1999 and 2000, it switched thousands of California customers’ long-distance plans (known as “slamming”) and added unauthorized charges (known as “cramming”) to customers’ telephone bills without their consent.
“This $20 million is a small price for (Qwest) to pay for their egregious behavior toward California customers,” said Sheri Inouye, a PUC spokeswoman.
Between January and May 2000 alone, the commission tracked 40,000 consumer complaints, she said.
But Qwest contends that less than 150 incidents of “cramming” and “slamming” occurred over the entire two-year period in question.
Letters of authorization or tape recordings of conversations between customers and Qwest sales agents confirming such switches were falsified, the PUC said in a statement, and were never made available to the commission or customers.
Qwest denied those charges. The company said that in 1999 and part of 2000, it did not have a third-party verification process in place, or even the room to store such tapes.
PUC officials also noted Thursday that Qwest failed to appropriately supervise its sales agents, as well as telemarketers hired as third-party contractors to win new customers, who “crammed” certain customers. The PUC said those targeted were mostly people who requested Spanish or Asian languages as their language of choice.
A Qwest official said the company never zeroed in on ethnic communities whose first language is not English.
The PUC has ordered Qwest to pay full refunds to all “slammed” or “crammed” customers in California within 90 days of Thursday’s ruling. The refunds will amount to the difference between the rates charged by a customer’s chosen long-distance carrier and Qwest’s rate.
The $20.3 million penalty also included orders for Qwest to change its business practices.
Commission officials are demanding that Qwest now inform customers of their right to choose any long-distance carrier; enhance oversight of third parties who market telephone services for Qwest; and offer more consumer protection information in various languages.
Chris Hardman, a Qwest spokesman, said the company started implementing policies in late 1999 to prevent “slamming” and “cramming,” resulting in a significant drop in complaints nationwide. All told, Qwest has fired about 30 sales contractors across the country for violating the firm’s marketing rules.
Over the past few years, Qwest has reached settlements in seven other states regarding “slamming” and “cramming” charges and is now considering appealing the PUC ruling to federal court.