Proposed Order Would Require Retail Supplier To Provide "All Terms And Conditions" During Telephone Solicitations
Proposed Order Would Require Supplier To Ensure Mailers Include "All Material Terms And Conditions"
March 18, 2022 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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A Maryland PSC Public Utility Law Judge (PULJ) has issued a proposed order in a complaint case against U.S. Gas & Electric d/b/a/ Maryland Gas & Electric and Energy Services Providers, Inc. d/b/a Maryland Gas & Electric ("MDG&E" or "the Company") which addresses allegations from PSC Staff that MDG&E did not comply with applicable requirements for telephonic solicitations, including the requirement for a signed contract (wet signature)
The PULJ's proposed order would provide as follows (emphasis by PULJ):
(1) "That MDG&E shall ensure that any mailers it uses from this point forward shall include all material terms and conditions of the sales offer"
(2) "MDG&E shall provide all terms and conditions of the contract to customers during telephone solicitations"
(3) "MDG&E shall provide a full written contract containing all terms and conditions within three days for all future telephonic sales in Maryland, whether outbound, or initiated by inbound calls"
"In this directive, I am ordering MDG&E, as a sanction for its past practices, to provide more information than is required by Maryland consumer protection laws in an effort to clear up the confusion regarding how much detail should be provided to potential customers," the PULJ proposes.
The complaint period at issue is January 2016 through June 2019, prior to Vistra's acquisition of MDG&E (via Crius)
As previously reported, MDG&E has already paid $150,000, plus refunds to certain customers, in addition to an estimated $305,000 in refunded early termination fees, under a settlement in the case. The new proposed order addresses discrete legal questions concerning telephonic contracting that were reserved for litigation
The proposed order addresses issues related to the Maryland Telephone Solicitations Act, Md. Code § 14-2201 et seq. (Commercial Law Article) ('MTSA') as follows:
i. Whether inbound or outbound calls placed by or to customers who have received direct mail promotional materials from MDG&E and who agreed to enroll into MDG&E’s electricity or natural gas supply service during the call, fall within the MTSA’s definition of 'telephone solicitation;'
ii. Whether MDG&E’s telephone enrollments are exempt from the MTSA,
iii. Whether MDG&E complied with the Commission’s regulations on enrolling customers by telephone pursuant to COMAR 20.53.07.08.C(4) and COMAR 20.59.07.08.C(4), if applicable.
The PULJ states that the Parties stipulated that MDG&E participated in inbound telesales whereby the Company enrolled customers who called the Company based on receipt of mailers it sent out, wherein the Parties agreed, "MDG&E sent direct mailers to prospective, existing, and prior customers before enrolling them on supply contracts for electricity and natural gas via a telesales."
The PULJ states that MDG&E also contracted with Maryland consumers, including "prospective, existing and prior customers" by outbound calls made by the Company.
The PULJ states that MDG&E did not obtain signed contracts from consumers it enrolled through telesales.
The PULJ noted that the PSC recently determined (story here) that both inbound calls resulting from materials sent by a supplier and outbound calls from the supplier fall within the definition of "telephone solicitation" under the MTSA. Absent certain exemptions, the MTSA requires that certain contracts solicited by telephone be reduced to writing in order to be enforceable
The PULJ would find that, "Regardless of whether there was an initial mailing of marketing materials to prompt a call from a potential customer to initiate the sale, the sale itself is made entirely by telephone. As such, I find that the MTSA applies to both inbound and outbound telesales calls."
The PULJ noted that a circuit court affirmed the PSC's MTSA decision in this prior case against another, unaffiliated supplier. Such unaffiliated supplier has appealed the court's decision (story here)
The PULJ said, "Once a determination has been made as to whether the MTSA applies to any transaction completed by telephone solicitation, it must be determined whether the transaction falls within an exemption under MTSA Section 14-2202(a). Exemptions exist for (a)(1) telephone solicitations based on previous visits to retail business establishments, (a)(2) customers with previous sales or a prior business relationship, (a)(3) transactions where a signed contract is obtained prior to the enrollment of a customer, (a)(4) goods that can be returned or refunded under certain conditions, (a)(5) where the marketing materials contain the key terms of the contract including name, address, and telephone number of the merchant, a description of the goods or services being sold, and any limitations or restrictions that apply to the offer, and (a)(6) bona fide charitable organizations."
The PULJ said, "At issue in this case are exemptions (a)(2) and (a)(5). MDG&E does not qualify for an exemption based on having a signed contract prior to enrollment of customers. The MTSA requires, among other things, that contracts made pursuant to telephone solicitations be reduced to writing and signed by the consumer, match the description of goods or services as that principally used in the telephone solicitation, 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. The record establishes that no signed contracts were produced with regards to the customers at issue in this proceeding."
The PULJ said, "Regarding exemption (a)(2) for customers with a previous sale or prior business relationship, the Parties stipulated that 6,617 of the 16,575 sales were re-enrollments of prior customers. I expressly reject the argument that the sending of mailers, postcards, or advertisements to potential customers creates a prior business relationship. Mailed marketing materials initiate the request for MDG&E to offer a good or service and request receipt of an inbound call from a customer in response to the mailer, in order to discuss the good or service being offered. The mailer, itself, does not constitute a prior business relationship with the customer."
The PULJ said, "The majority of the argument based on the facts in this case regard whether MDG&E qualifies for an exemption based on the marketing materials mailed out to initiate incoming calls from potential customers. MTSA Section 14-2202(a)(5) requires that transactions initiated by marketing materials contain all key terms of the contract, including: (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."
The PULJ said, "One MDG&E mailer fails to contain a phone number for the Company, but all others contain the information required by (i) above. The Parties disagree on how much information is required to satisfy the requirements of (ii) and (iii) a description of the goods or services being sold and any limitations or restrictions that apply to the offer. The MDG&E mailers offered as evidence in this matter failed to contain the terms of the contract. Most of the mailers have no price listed and do not contain the rate to be charged. Similar to SmartEnergy, the mailers used by MDG&E 'provide minimal information about the offer and did not include essential information such as price, renewal terms, or other items outlined in COMAR 20.53.07.08.' Some mailers contain specific incentives such as a specific free month of gas or electric service up to a maximum amount, monthly dining certificates, grocery coupons, etc. Some of the mailers simply highlight the Company's J.D. Power and Associates High Customer Satisfaction rating, generally describe deregulation and customer choice, announcing that Company representatives will be soliciting door to door, or announcing general savings or possible incentives. Although a few of the mailings are specific about the restrictions of one or two of the incentives being offered, the mailings do not demonstrate a specific offer or do not specify limitations and restrictions. I find that the Company's t [sic] mailings were deceptive and/or misleading. The different mailers seem to be describing different offers, but the lack of detail as to the price, term, incentives being offered, and limitations or restrictions, make an understanding of the exact offer and a comparison of the apparently different offers impossible. MDG&E separates the requirements for a description of goods or services being sold and any limitations or restrictions that apply to the offer and argues that all it needs to provide is a description of the goods or services being sold and alleges that its very general mailers provide sufficient information. MDG&E's argument would allow for a mailing that simply states the Company sells gas or electricity supply. Clearly, the fact that the offer, which is the word specifically included by the legislature in MTSA Section 14-2202(a)(5)(iii), cannot be determined or compared with others based on the plain language included in the relative mailing show. Rather, the mailings insufficiently contain both a description of the goods or services being sold and any limitations or restrictions that apply to the offer. The mailings used by MDG&E, for the most part, do not satisfy the requirements for the exemption in MTSA Section 14-2202(a)(5)."
The PULJ said, "There is no evidence in the record as to which mailer any inbound caller was responding to. The telesales simply confirmed that a call was in response to receipt of a postcard, and if not, the call was terminated. Thus, it is unclear which of the mailers provided prompted any sale, which would have been important, given the differing levels of compliance of each mailer."
The PULJ would find that, "some of the 16,575 contracts at issue during the time period fall into a MTSA exemption and some do not. Nevertheless, I find that as a general business practice, MDG&E has violated MTSA with its sales."
The PULJ said, "COMAR 20.53.07.08C(4) and COMAR 20.59.07.08C(4) apply to suppliers contracting with customers as a result of telephone solicitation exempt from all applicable State and federal law. Thus, should the MTSA not apply, these regulations are still applicable. These regulations require gas and electric suppliers to mail or otherwise transmit to customers a complete written contract within three business days of the contracting conversation. These regulations further require full disclosure of the terms and conditions during the telephonic sale. The Parties disagree over which specific terms and conditions must be disclosed during a telephonic sale. OPC offers several examples of conditions or limitations not provided upon the telephone contact, while MDG&E argues that these examples are boilerplate or not material to the sale. Illustrative of this argument are the examples provided by OPC of minimal and maximum annual usage thresholds and the ability of MDG&E to require future credit enhancements. MDG&E offers its TPV script as proof that it disclosed all material terms and conditions of its contracts, however, using OPC's example of the minimal and maximum annual usage threshold as but one example, the level of detail provided by MDG&E is not sufficient enough to refute the claimed lack of information."
The PULJ said that the TPV script provided by MDG&E merely stated on this point:
• That MDG&E will periodically ask the utility for information about the customer's account, including usage, payment, and other information necessary to support gas/electric service on the account; and
• How that information will be used and (not) disclosed for any other purpose.
"This is the closest refuting fact and argument that can be found to that claim by OPC which I find to be insufficient at best," the PULJ said
"The Stipulation states that upon enrollment, MDG&E provided the customers at issue in this matter a welcome letter, terms and conditions, and a contract summary. I find, as the Commission has previously found, that a contract summary, as evidenced by the specific facts in evidence in this case, is insufficient to meet the requirements of disclosure of material contract terms and conditions," the PULJ said
The PULJ would find that MDG&E is in violation of the terms of the MTSA, in that it engaged in telephone solicitations, enrolling customers without a signed contract and without qualifying under any other exemption under the MTSA, and would also find, for those sales that were exempt from MTSA, and separate from any MTSA violation, that MDG&E is in violation of COMAR 20.53.07.08C(4) and COMAR 20.59.07.08C(4), having not provided customers with a written contract within three business days of contracting with customers
In discussing appropriate sanctions, the PULJ states, "A look at MDG&E's sales and marketing practices as compared to that of some of the other companies recently sanctioned by the Commission shows that MDG&E has made an attempt to comply with consumer protection laws. MDG&E makes clear statements that it is not the utility and uses a TPV. MDG&E has also carefully crafted training materials. While MDG&E fails to send a full written contract after a completed sale, it does send a contract summary and statement of terms and conditions after a completed sale. The facts in evidence in this matter are of business practices not as egregiously in violation of consumer protection laws as some other bad actors recently sanctioned in Maryland."
Noting the prior settlement discussed above, the PULJ states, "I agree with Staff and find that no further monetary penalty is required, as the previous penalty paid by MDG&E [under the settlement] is within the scope of civil penalties imposed on other suppliers for similar violations."
"However, having found just cause, but refraining from revoking or suspending MDG&E's licenses in Maryland or imposing a moratorium on adding or soliciting additional customers, I do find, pursuant to PUA § 7-507(k)(1), that a remedy is required to protect Maryland consumers from misleading telephone solicitations. Therefore, MDG&E is directed (1) to ensure that any mailers it uses shall include all material terms and conditions of the sales offer, (2) to provide all terms and conditions of the contract to customers during telephone solicitations, and (3) to provide a full written contract containing all terms and conditions within three days for all future telephonic sales in Maryland, whether outbound or initiated by inbound calls. In this directive, I am ordering MDG&E, as a sanction for its past practices, to provide more information than is required by Maryland consumer protection laws in an effort to clear up the confusion regarding how much detail should be provided to potential customers," the PULJ would order
"All material terms should clearly define the full offer of the goods/services that will be in the contract and should at the very least include the rate, the length of contract if applicable, specific detailed incentives included, the time limit of the offer, and any restrictions and/or limitations on the offer. MDG&E should consider COMAR 20.53.07.8(A)(2)(a)-(p) and COMAR 20.59.07.8(A)(2)(a)-(p) for guidance as to what terms should be considered material," the PULJ said in opining on the meaning of all material terms and conditions
Given the further appeal by an unaffiliated supplier of the PSC's recent findings with respect to the MTSA, MDG&E had requested that the case be stayed pending resolution of such appeal and attendant legal questions, but the PULJ denied such request