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PSC Staff Recommend $25,000 Fine Against Retail Supplier

OPC Alleges "Outrageous" Sales Call

March 10, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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Staff of the Maryland PSC have recommended in testimony that the PSC impose a civil penalty in the amount of $25,000 on Direct Energy Services, LLC due to alleged instances of slamming and alleged instances of providing false and misleading statements to customers

Staff's testimony was filed in a proceeding addressing a complaint brought by Staff against Direct

A witness for Staff alleged that, in three instances, "Direct failed to acquire affirmative confirmation by a customer before enrolling that customer m violation of COMAR 17,; and"

Staff also alleged that five customer complaints alleged that agents of Direct provided false and misleading statements to customers in violation of COMAR and

Direct Energy said in a statement concerning the matter that, "Direct Energy has actively participated with the Maryland Public Service Commission during these hearings. We take our sales quality seriously and we work with all customers who complain to come to a resolution. We are committed to continuing to work with Maryland stakeholders to improve the state's competitive retail energy market. We look forward to responding to all issues when we file our response within the next 30 days."

Staff's witness testified that, "I believe it is unclear if these complaints show a pattern or practice of systemic violations, however, each of the above complaints represents a serious violation that should be subject to a civil penalty."

Concerning, the three alleged instances of slamming, Staff alleged that the authorization obtained by Direct was not completed by the account holder as required by COMAR. In two of the instances, the authorization was alleged to have been executed by a relative of the account holder.

With regards to the other slamming complaint, Staff alleged that, in CAD Complaint 118335794-L, "the account holder claimed that the former account holder, her deceased husband, did not and could not have authorized the enrollment of their electricity account with Direct Energy because he was ill with diabetes and Parkinson's disease at the time of the enrollment. The contract was signed with an indecipherable mark and the third party verification ('TPV') call records a voice which the account holder says is not her husband's voice. She says that the voice on the tape lacks his Bronx accent and because he was so ill at the time, he was incapable of making the telephone verification. He passed away one week later. In my opinion, the voice on TPV didn't sound like an elderly man with Parkinson's who would pass away one week later."

A witness for Staff said that, "I believe it is unclear if these complaints show a pattern of slamming, however, each instance of slamming is a serious violation."

With respect to the alleged instances of false and misleading statements, Staff alleged that, "With regards to CAD Complaint 317329477-L, the account holder states that the Direct representative who came to his house on March 6, 2017 was deceptive. The representative asked to see the account holder's bill, claiming there was 'an error on the back of my gas bill.'"

Staff alleged that, "With regards to CAD Complaint 318337149-W, the account holder complained about an attempted slam. The account holder was left a message on her phone to call immediately about her BGE account. When she called she was told she had been sent a letter about her account being overcharged and was asked for her Choice ID number. Direct did not provide recordings of this portion of the call."

Staff alleged that, "With regards to CAD Complaint 418338018-L, the account holder claims to have received a call from a Direct representative claiming to be from BGE."

Staff alleged that, "With regards to CAD Complaint 419343664-W, the account holder stated that on April 4, 2019, two representatives from Direct came to his home insinuating that BGE sent the representatives to his house because he did not respond to a notice regarding a rate change. He further claims the representative did not show a badge/ID, and when he told her he did not receive a notice from BGE, the representative stated, 'They wouldn't have sent us out here without a reason.' He claims the representative finally revealed that she was with Direct and stated that BGE no longer supplies gas and electricity, but does this through Direct. Finally, he claims the representative stated, 'It's not going to cost you anything.'"

A witness for Staff testified that, "The statements by sales representatives here do not seem to be the result of a company mandated script. However, the Company is responsible for the actions of its agents. Each of these complaints was filed by a customer who did not sign up with Direct, so there is no apparent reason for any of these customers to have made false statements with CAD."

The Maryland Office of People’s Counsel alleged in testimony that a greater number of customers were enrolled without authorization because such customers were enrolled without all of the documents they were entitled to receive under the Maryland Door-to-Door Sales Act

Specifically, OPC said that the Door-to-Door Sales Act requires a long-form cancellation notice that is detachable from the contract and that has been "completed" at the time the contract is signed, with both the current date and the date by which the buyer must exercise the right to cancel

OPC alleged that in 10 cases, arising from customer complaints, Direct Energy failed to provide evidence of a completed long-form cancellation notice

OPC also alleged that Direct Energy enrolled customers via telemarketing without the wet signature required under the Maryland Telephone Solicitations Act and alleged that mailers relied on by Direct Energy for an exemption from the wet signature requirement fail to meet the exemption standard. A telephonic contract does not require a wet signature if, among other things, the contract was made pursuant to the customer's review of a radio, TV, or mailing advertisement that included a, "description of the goods or services being sold."

OPC's witness alleged, "having focused my examination on the mailers used for consumers in the BGE territory, I conclude that none of them included a complete 'description of the goods or services being sold' or full disclosure of 'any limitations or restrictions that apply to the offer.' For example, two of the mailers did not contain either the rate or the term of the product, and the three that contained a rate, did not reference a term. They certainly lacked many of the details that were included in the 'terms and conditions' that would not be received by the consumer until several days after the call, including the previously referenced legal and privacy-related terms and the important disclosure that the rate would become variable after the 'initial term,' at rates that might exceed the utility’s standard offer rate."

OPC alleged that, "The fact that Direct Energy cannot provide a wet contract for single CAD complaint regarding telephone sales suggests that failing to obtain signed contracts is standard practice for Direct Energy."

A witness for OPC also said that the sales portion of a telemarketing call by an agent for Direct was, "outrageous."

OPC's witness alleged that on such call, "The sales agent on this call rattles off the sales details very, very quickly. The consumer can’t get a word in edgewise. Preparing the consumer for the TPV, the sales agent says multiple times that the consumer cannot ask any questions until the completion of the TPV."

OPC's witness alleged that it is "absolutely" obvious that the consumer had been misled or deceived during this call, with OPC's witness alleging, "The TPV has barely begun when the consumer states that she has no idea what she is applying for. At this point, the sales agent jumps back onto the call and attempts, with rapid-fire statements, to bully the consumer into completing the transaction, at which point the call is disconnected."

OPC also alleged the mailers used by Direct Energy were misleading and otherwise not in conformance with regulations

"Perhaps the most troubling is the direct rate comparison with the utility and the implication that seasonal variability in the utility’s rates is something the consumer needs to be protected against. On the three mailers that compared Direct Energy’s price with that of the utility (two by referencing a specific rate and one by claiming the rate was 'lower'), the price comparison was a snapshot from a single date and did not reflect how the supplier and utility rates would compare over an undisclosed term. A footnote in each of these, in a much smaller font than the body text, discloses: 'Direct Energy’s fixed price is lower than BGEs [sic, as quoted in OPC testimony] Fixed Rate for Basic Service as of [date]. BGE’s fixed rate is effective from February 1, 2019 and may change at any time. Savings are not guaranteed throughout the Initial Term of your Agreement with Direct Energy.' This disclosure is highly material and should not be relegated to the fine print. Moreover, without knowing the date of enrollment and the term, one cannot determine for how long the utility rate will remain greater than Direct Energy’s or whether a utility rate decrease is imminent at the time the consumer would have received the mailer. Finally, the statement that BGE’s rate 'may change at any time' is deceptive inasmuch as it implies a degree of uncertainty about the utility’s rate that is inconsistent with known practices and trends. On top of this, the mailer never discloses that, when the initial term expires, Direct Energy charges a variable rate and that this rate may exceed the utility’s SOS rate," a witness for OPC alleged

OPC took issue with the assertion in a mailer that a contract with no early termination fee is 'risk free.'

"Cancelling does not release the consumer from other contractual terms associated with their agreement," OPC said

OPC also alleged that, on the two mailers that advertised a price, Direct Energy did not disclose, as required by COMAR that its prices are not regulated by the Commission

OPC also alleged that Direct Energy’s license number included is not included, 'in a clear and conspicuous manner,' on the mailers as required by COMAR, with OPC's witness alleging, "It appears as the last bit of text on the page, in small font, below the footnote."

OPC did not recommend any specific action against Direct Energy

Case 9614

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