Pacific Bell Ordered to Pay Millions in Service Refunds

SAN FRANCISCO —  State regulators ordered Pacific Bell on Wednesday to pay millions of dollars in refunds to customers who were pressured into buying telephone services that they neither needed nor wanted.

The California Public Utilities Commission staff estimated that the total amount to be refunded--including charges for unwanted service and 7% interest on those charges--would be about $41 million. The refunds could amount to as little as $20 million, however, or as much as $100 million, depending on the number of eligible customers who apply for them and the extra services they bought.

The PUC action followed a cease-and-desist order in May after an investigation found that Pacific Bell was using high-pressure sales tactics to sell consumers a package of services--including such features as call-waiting and conference-calling services--without explaining the cost of each service or the availability of low-cost “Lifeline” service.

Minority groups, the elderly and the poor were particularly hard-hit by the deceptive sales practices, consumer groups charged.

Only customers who signed up for new services or changed existing services after Jan. 1, 1985, are eligible for the refunds. As many as 1 million customers could be affected.

The pay-back plan was worked out in negotiations by Pacific Bell, the PUC staff and representatives of consumer advocacy groups who protested the marketing practices.

The PUC took no action on a proposed fine of an additional $49.5 million. The commissioners will not act on that staff recommendation until they rule on a pending Pacific Bell rate case later this year.

Pacific Bell will inform its 9 million customers of the refund procedures in its September and October billings, said spokesman Jack Saunders. The procedures will be outlined in English, Chinese, Korean, Spanish and Vietnamese.

Saunders said that some refund claims already have been filed, and that the average amount involved has been about $40. But Robert Gnaizda, an attorney with the Public Advocates law firm, said that in a worst-case scenario, a customer could receive a $400 refund.

The PUC also ordered Pacific Bell to submit a proposal within 45 days to show how it will make its bills easier to read. The proposal is intended to help “unbundle” the bills and clarify which services consumers have and what those services cost, said PUC President Donald Vial.

Customers eligible for refunds include:

- Those who paid an $80 deposit, although their income status did not require it.

- Lower-income customers who were eligible for Universal Lifeline phone service but were unaware of it. (Lifeline service costs as little as $1.48 a month, compared to the $8.25 regular basic rate.)

- Those who paid for extra services--such as call-waiting and call-forwarding--without asking for them.

Refunds will be calculated for services since Jan. 1, 1985, when the deceptive sales practices began, said Dean Evans, director of the PUC’s evaluation and compliance division. Customers may either have their refunds credited to their monthly bills, or request a check.

Some marketing employees and managers have been fired or transferred as a result of the overly aggressive marketing campaign, Saunders said, but he refused to disclose the number of employees involved.

He also said the company’s sales-incentive program has been overhauled. Rather than giving prizes to employees for meeting or exceeding sales quotas, awards will be based on how satisfied an employee’s customers are, he said.

Consumer advocates hailed the PUC’s actions as a victory for the public.

Gnaizda hailed the decision as “the best anywhere in the country.” He predicted that the case will have a far-reaching impact and “will lead to corrective efforts across the nation” and at other phone companies in California.

“It (the PUC order) corrects some egregious sales practices,” said Sylvia Siegel, executive director of Toward Utility Rate Normalization, a San Francisco-based consumer group. “Unsophisticated customers were sold a bill of goods.”

Siegel said her group will watch Pacific Bell to make sure the refunds are made.