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People's Counsel Asks Maryland PSC to Confirm General Prohibition on Telephonic Contracting

April 24, 2012

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Copyright 2010-12 Energy Choice Matters

The Maryland Office of People's Counsel said that the state's electric and natural gas markets would benefit from "clarification" regarding the use of telephonic enrollments by suppliers, expressing frustration with the lack of understanding, particularly among new entrants, that telephonic enrollments are not valid absent a written signature, unless the transaction qualifies for certain statutory exemptions

In comments on the recent supplier applications (or amendment applications) of at least two retail providers, OPC has noted that the suppliers' sales scripts and contracts contemplate that upon telephonic third party verification, the contract is complete and the enrollment will be processed, and that no written signature is required from the customer.

"OPC has a significant concern with energy suppliers' failure to acknowledge the applicability of the Telephone Solicitation Act and its requirements to 'cold call' solicitations by energy suppliers. There appears to be a lack of understanding that the requirement to secure a signed written contract as a follow-up to a telephone solicitation is the general rule, unless the solicitation falls within certain specific exemptions, such as a pre-existing business relationship with the customer," OPC said.

Among other things, the Maryland Telephone Solicitations Act, Md. Code Ann. Com. Law § 14-2201 et seq., provides that, "[a] contract made pursuant to a telephone solicitation ... [s]hall be reduced to writing and signed by the consumer."

Such contract shall also, "contain, in at least 12 point type, immediately preceding the signature, the following statement: 'You are not obligated to pay any money unless you sign this contract and return it to the seller.'"

The contract shall also, "contain the name, address, and telephone number of the seller, the total price of the contract, and a detailed description of the goods or services being sold."

However, the provisions of the Maryland Telephone Solicitations Act do not apply to a transaction:

(1) Made in accordance with prior negotiations in the course of a visit by the consumer to a merchant operating a retail business establishment which has a fixed permanent location and where consumer goods are displayed or offered for sale on a continuing basis;

(2) In which the person making the solicitation or the business enterprise for which the person is calling:

(i) Has made a previous sale to the consumer; or

(ii) Has a preexisting business relationship with the consumer;

(3) Which is covered by the provisions of Subtitle 3 of this title (relating to door to door sales);

(4) In which:

(i) The consumer may obtain a full refund for the return of undamaged and unused goods to the seller within 7 days of receipt by the consumer; and

(ii) The seller will process the refund within 30 days of receipt of the returned merchandise by the consumer;

(5) In which the consumer purchases goods or services pursuant to an examination of a television, radio, or print advertisement or a sample, brochure, catalogue, or other mailing material of the merchant that contains:

(i) The name, address, and telephone number of the merchant;

(ii) A description of the goods or services being sold; and

(iii) Any limitations or restrictions that apply to the offer; or

(6) In which the merchant is a bona fide charitable organization as defined in § 6-101 of the Business Regulation Article.

The PSC has previously opined (in Case 8738) on the interaction of the Telephone Solicitations Act and the retail electric market, affirming that the Telephone Solicitations Act controls.

Specifically, in Order No. 75949, the PSC held that, "§ 14-2203 of the Commercial Law Article of the Annotated Code of Maryland and applicable federal consumer protection statutes will govern telephone contracting for electric service in Maryland."

In Order No. 76110, in response to a request for clarification, the PSC noted the various exemptions in the Telephone Solicitations Act that do not require the use of a wet signature. Specifically, the PSC noted that it required disclosure of the information required for an exemption contained in § 14-2202(5)(i), (ii), and (iii) in all supplier ads except "image advertisements."

"Given these exceptions in the Telephone Solicitation Act, the Commission anticipates that in most instances, a 'wet' signature will not be required to effect a contract over the telephone." However, the Commission was clear that the need for a wet signature was only obviated consistent with the exemptions in the Telephone Solicitation Act.

The Commission also clarified in Order No. 76110 that, "if complete contracts, containing all Commission-required terms, conditions, and information, are mailed prior to telephone calls, such contracts may be formed over the telephone if the following conditions are met: the supplier must obtain a verbal response from the customer confirming that the contract was received; the customer still possesses a copy of the contract; and confirmation that any customer questions relating to the contract were answered."

Finally, in adopting residential customer protections at COMAR 20.53.07, the Commission recognized that only certain telephonic transactions were exempt from the Telephone Solicitations Act and its wet signature requirement (and set forth requirements for such exempt transactions).

While OPC believes that clarification of telephone solicitation requirements would be beneficial, "OPC believes that the Act and the Commission's regulations on telephone solicitation are clear."

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