Committee investigation confirms advocates’ worst fears about “cramming” – National Consumers League

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By Alex Schneider, NCL Public Policy Intern 

For more than a decade phone bill cramming has been costing consumers millions of dollars.  But until the recent release of the Senate Commerce Committee’s report on cramming, few knew just how pervasive and insidious this problem has become.

“Cramming” is defined as the placement of unauthorized third-party charges on a consumers’ monthly phone bill.  The charges could be for anything from yoga classes to fax or voice services to credit protection plans.  But overwhelmingly, they have one thing in common: consumers were charged without ever asking to be signed up for the service.

Since the mid-1990s, third parties have crammed these illegal charges onto monthly phone bills, relying on the concept that consumers will pay their bill without painstakingly analyzing each and every line item.  The phone industry said it would clean up its act, but, as Senator John Rockefeller made clear at a hearing of the Senate Commerce Committee last Wednesday, these voluntary fixes just haven’t worked.

“I plan to introduce legislation that will a put a stop to this,” Rockefeller said. “I simply cannot find any grain of sense in us having to have a hearing like this.”

Astonishing findings

The committee report extends 50 pages and reveals that cramming hurts individuals, government agencies, and businesses of all kinds (including the phone companies themselves!).  The following are a sampling of the committee’s new findings:

  • Verizon, AT&T, and CenturyLink/Qwest earned $650 million since 2006 in $1 and $2 incremental fees as a kickback for permitting third-party phone bill fees.
  • Crammers have doctored authorization forms to charge consumers in egregious ways, including listing deceased relatives as those who signed up for the services and charging unlikely phone numbers, including dedicated lines used for ATMs, alarm systems, modems, and emergency calls.
  • Companies allegedly offering third-party services operated out of fake mailboxes, fake offices, and fake residences.  In one case, the president of a company had no involvement in the business and had been asked to sign some forms by a friend.  In another instance, the address of a cramming company was listed as “Suite #237,” but the ‘suite’ turned out to be a mailbox at a UPS Store, not the greatest of places to host an office meeting.
  • A gaming service charged to customers by a “company” called EZPhoneBill provided the same games as another free website and had no users despite enrolling 20,000 customers at $14.95 per month.
  • Bill blocking procedures initiated by customers did not 100% guarantee they would not be billed.

Solutions To Cramming Are Within Reach

In a letter to the Senate Commerce Committee, NCL urged Congress to follow the lead of Vermont and pass legislation ban third-party charges on landline phone bills.  As we wrote, the findings of the Commerce Committee as well as those of various state Attorneys General, the FCC, and the FTC highlight that there is little legitimate reason why a consumer would want to be billed for a third-party service on their wireline telephone bill.

Indeed, a FCC investigation released last month found that only 20 out of 17,384 consumers actually used the third-party service for which they were billed, a usage rate of roughly 0.1%.

As assistant Attorney General of Vermont, Elliot Burg, noted at last week’s hearing, consumers don’t expect that they can be billed for unrelated products and services on their phone bills.  Thus they aren’t likely to be on the lookout for cramming charges. Lawmakers in Vermont concurred, took action to ban third-party charges, thus saving consumers in that state from future aggravation due to cramming.

Cramming is a Significant Crime with Real Victims

The Commerce Committee estimates that third-party charges on landline phone bills cost consumers $2 billion every year.  That doesn’t include the time and energy that goes into calling customer service to rectify a bill or the losses to businesses that might be required to take precautionary measures to review employee phone bills for potential fraud.

Cramming is not going away.  The fact that AT&T itself has been crammed 80 times, according to Commerce report, is indicative of a larger problem that requires an aggressive solution.  We believe that banning third-party charges on landline phone bills is just that solution.

Consumer Tips for Avoiding Cramming

Until third-party charges are banned, here are some basic steps you can take to avoid falling victim to cramming:

  1. Contact your phone company and ask to opt-out of third-party billing.
  2. Watch for any changes in your monthly phone bill.  Even a change of a few dollars could indicate a cramming charge.
  3. Be careful about answering phone surveys or Internet surveys that ask for your phone number, or participating in online sweepstakes.  If you do participate, make sure you understand any charges you may incur.
  4. Before paying your phone bill, scan for a “third-party” charges section.  If you do not recognize the charge and if you have any questions, immediately call your phone company.
  5. Learn more from the FTC and FCC about filing a complaint or file a complaint directly with NCL at www.fraud.org.