As he winds his Senate career down, Sen. Jay Rockefeller, D-W.Va., is continuing his battle against “cramming” — a practice that many American consumers don’t know about, but one that has cost them billions of dollars in recent years.
Cramming takes place when third parties add charges onto people’s telephone bills for services they approved, but did not understand or know how much they would cost. When printed on people’s telephone bills, cramming charges are typically described in vague terms, such as service fee, service charge or other fees.
In 2011, the Senate Committee on Commerce, Science and Transportation — of which Rockefeller is chairman — found out cramming had cost consumers billions of dollars on their landline bills. The committee found that third parties had charged more than $10 billion in fees to people’s landline telephones over the previous five years.
As a result, the three largest telephone companies — Verizon, AT&T and CenturyLink — agreed to stop placing any third-party charges on their landline telephone bills. But they continued to allow third-party companies to place charges on people’s cell phone bills.
Rockefeller’s committee held another hearing last week, and the chairman said that the problem persists.
“Despite industry assurances that their self-regulation would protect consumers against unauthorized third-party charges on their phone bills, it now has become clear that — just as with landline phone bills — ‘crammed’ charges on mobile phone bills have been widespread and have cost consumers millions of dollars,” Rockefeller said in a statement outside the hearing.
“We must review what we learned from consumers’ cramming experiences to apply appropriate consumer protections to evolving billing methods,” he said.
Today, crammers focus increasingly on people who use wireless cell phones.
In recent years, telephone companies have allowed third-party vendors to bill telephone customers for services including online gambling, online photo storage, roadside assistance and webhosting — which helps people and companies make their websites more widely available on the Internet.
Rockefeller’s new report points out that telephone numbers have become “a payment method similar to credit card numbers. However, third-party charges levied on the phone bill platform did not receive the same protections as credit card payments.”
“A consumer’s liability for unauthorized charges made to his or her credit card is typically limited to $50. Credit card consumers also “have the right to dispute unauthorized charges and … the right to reverse a charge,” the report released in Wednesday’s hearing states.
During Wednesday’s hearing, Sen. Richard Blumenthal, D-Conn., said telephone companies “almost certainly welcomed the revenue that third-party billing was generating for them.”
Wireless carriers began receiving between 30 percent and 40 percent of the bills each third party was adding to their customers’ monthly phone bills.
“The financial incentive to allow third-party billing seems to conflict with protecting their customers from fraud,” Blumenthal said. Some companies charged people $9.99 a month, month after month, to give people their horoscopes. Those small charges made a big impact.”
Blumenthal hopes new measures recommended by the Senate Committee “will be truly effective.”
Terrell McSweeney, the newest member of the Federal Trade Commission, said during the hearing, “The FTC began targeting landline cramming in the late 1990s. As consumers have migrated to mobile phones, they have been tricked in to subscribing for services such as free concert tickets and $1,000 gift cards.
“Frequently, consumers are unaware they are being billed for third party-services. It is unclear on their phone bills.”
McSweeiney believes the federal government should take additional steps to block cramming, including making it “clear to customers that they can block all third-party accounts” and requiring telephone companies to “clearly delineate third-party charges on their bills.”
Since the spring of 2013, the FTC has filed three enforcement actions, including one alleging that T-Mobile deceptively describes cramming on bills the company sends to its customers.
“In July, the FTC filed its first wireless cramming complaint against a major carrier, alleging that T-Mobile allowed unauthorized third-party charges on consumers’ wireless bills, including in some cases, for services that had refund rates of up to 40 percent,” Rockefeller said in a press release last week. A spokesman for T-Mobile, working at the company’s offices in Washington, D.C., said on Friday, “A group of people will take a look at it. Our legal teams are going to look at it. T-Mobile will refund those customers.”
The spokesman, who refused to give his name, then hung up immediately and would not take further questions.
On July 2, when the FTC action against T-Mobile was announced, Rockefeller said, “The FTC’s allegations only heighten my concern about the industry’s repeated assertions that voluntary oversight effectively protects consumers from cramming. I am pleased the FTC is scrutinizing carrier practices and look forward to seeing how this FTC action will inform the Committee’s work to make sure the wireless industry is accountable to consumers.”
Travis LeBlanc, acting chief of the Federal Communications Commission’s Enforcement Bureau, said during the hearing, “The report released in 2011 by Rockefeller showed these companies had put $2 billion in charges on land line bills.
“Consumers’ increased reliance on mobile phones makes the problem ever more serious. Since 2010, we have had thousands of complaints. Wireless complaints have grown from 15 percent to 55 percent [of all our complaints].
“These numbers are just the tip of the iceberg. Since most people do not know they have been crammed,” LeBlanc said, “we have no reason to believe T-Mobile is the only phone company doing this.”
During the July 2011 hearing, Rockefeller said, “More than a decade after telephone companies implemented their voluntary guidelines, hundreds of cramming companies continue to place tens of millions of bogus charges on families’ and businesses’ landline telephone bills every year.
“While the individual charges are usually small amounts between $10 and $30, they have added up to billions of dollars in bogus charges for American families and businesses over the past decade.”
The Senate Committee report released on Wednesday said, “Third-party billing on wireless phone bills has been a billion dollar industry that has yielded tremendous revenues for carriers. AT&T, Sprint, T-Mobile and Verizon generally retained 30 percent to 40 percent of each vendor charge placed.”
Gayle Kansagor, a corporate communications official with AT&T, said her company “is discontinuing third-party billing for third-party services on our landlines.”
AT&T offers advice to consumers, Kansagor said, about how to avoid cramming and how to avoid signing up for services people do not want on its website at: www.att.net/ smartcontrols-Cramming.
That advice includes:
— Avoid placing any calls to 900 numbers.
— “Avoid accepting collect calls, signing up for sweepstakes or contests online.”
— Avoid entering your contact information on websites that are not secure, such as websites that make solicitations over the phone.
— When you sign up for various services, websites “sometimes have fine print that note by providing your information, you’re signing up for additional services.”
— “Always read the fine print and know what you’re signing up for. In some cases, customers simply may not have understood a transaction when it took place.” Customers who fail to do that “may be giving away your information and signing up for services you don’t want.”
The FCC also offers advice on its website about how to avoid cramming on landlines, wireless telephones, beepers and pager services at: www.fcc.gov/guides/cramming-unauthorized-misleading-or-deceptive-charges-placed-your-telephone-bill.
The FCC urges all telephone users to review their monthly telephone bills carefully, looking specifically for:
— Charges explained in general terms, using words and phrases like “service fee,” “service charge,” “other fees,” “voicemail,” “mail server,” “calling plan,” “psychic” or “membership.”
— Charges “added to your telephone bill every month without a clear explanation of the services provided, using terms such as “monthly fee” or “minimum monthly usage fee.”
— Charges for a service that customers authorized, but were misled about its actual cost.
The FCC also urges telephone users to look at the names of all other companies that are listed on monthly bills and to determine what services were provided by those companies.
State government officials have also taken action against abuse of telephone numbers to trick consumers into signing up for services they did not know about or did not want.
Between 2008 and 2010, the report states, Florida Attorney General Bill McCollum “reached settlements with AT&T Mobility, Verizon, T-Mobile and Sprint, wherein the companies agreed to issue refunds to consumers billed for ringtones, wallpapers and other mobile content that had been advertised on the Internet as free, but resulted in consumers being signed up for monthly text message subscriptions.”
Reach Paul J. Nyden at email@example.com or 304-348-5164.