While the federal government and numerous states all work to issue and enforce legislation related to cramming, Vermont is stepping out ahead of the crowd.

“Cramming” is generally understood to mean the placing of unauthorized charges on unrelated third-party bills. Most often, the laws regulating cramming pertain to telecommunications bills. In the interest of consumer protection, federal and state authorities are working to prohibit cramming, requiring express authorization prior to the placing of third-party charges on consumer’s service provider bills. While the Federal Communications Commission, state public utility commissions and attorneys general work to regulate crammers, Vermont has been even more aggressive on this front.

As recently as May 2012, the Vermont Attorney General filed suit against 13 companies and 13 individuals that were allegedly involved in charging more than 8,000 Vermont residents and businesses over $625,000 on their phone bill for unauthorized services. The defendants are marketers of voicemail, email, and similar services. According to the state, the unauthorized charges violated the Vermont Consumer Fraud Act, which requires specific notice for any charges for non-telephone services on a telephone bill. The complaint asks the court to prohibit future violations of the law and award $10,000 in civil penalties for each past violation in addition to full refunds. Since that time, Vermont has passed a new law that creates a virtual ban on all third-party charges with limited exceptions.

All companies that partner with third parties to bill consumers and that are interested in placing their charges on third-party bills should be aware of Vermont’s recent activity in this area and of other federal and state laws governing cramming. Unlike many states that simply require specific authorization procedures prior to billing, Vermont virtually prohibits third party charges on telecommunications bills. Therefore, third parties may be required to issue separate bills to cover their services — even low-cost monthly services.

Arent Fox is continuing to monitor issues related to e-commerce and billing. Please contact Anthony V. Lupo, Sarah L. Bruno, Matthew R. Mills, or Eva J. Pulliam with questions.