If you pay your cellphone bill without studying it first, look again. If there are charges that don't make sense, such as “web hosting” or “member fee,” chances are, you've been crammed.
“You have to read them like a hawk every month to make sure everything there is legitimate,” said Bill Brauch, director of the Iowa attorney general's division of consumer protection.
Attorneys general from Iowa, Nebraska and 38 other states and territories have asked the Federal Trade Commission to take action to bolster billing security amid growing reports of cramming. That's the illegal practice of placing unauthorized charges on customers' phone bills. The rip-off started in the 1990s with landline bills, and now it's a growing problem with cellphone bills. Consumer Reports estimated that landline and mobile cramming could be costing American consumers as much as $2 billion a year.
“In the last several years we've been receiving an increasing number of complaints from consumers about charges that have appeared on their cellphone bill for services that they don't think they have, or don't think they ordered, or didn't realize would be a subscription,” Brauch said.
Attorneys general receive several hundred complaints a year from consumers about charges, Brauch said, which are often around $9.95 and appear on their phone bills without their authorization. Once they discover the charges on their bills, sometimes after several months, consumers are rarely able to obtain full refunds.
The National Association of Attorneys General submitted comments to the FTC following a May roundtable the agency held about how to stop cramming. Among the attorneys' concerns is what they call the inadequate disclosure of third-party charges on mobile phone bills and the lack of state and federal statutory protections governing consumer disputes about fraudulent or unauthorized charges placed on the bills.
Stephanie Rosenthal, FTC chief of staff, financial practices division, said all comments submitted after the roundtable are being considered. The FTC is looking at a couple of options, including filing more cases against the third-party crammers.
Brauch said the group will continue to work with the cellphone industry to find solutions, but said that if providers are not taking “reasonable steps, they could face lawsuits themselves by the attorneys general for being a knowing conduit for fraud.” He said cellphone service providers don't want to eliminate third-party charges altogether because it would prevent callers from being able to make charitable donations via text message.
Nebraska Attorney General Jon Bruning called on mobile phone carriers to work with attorneys general to find a solution to cramming.
“Nebraskans deserve to know what they are paying for, and mobile carriers should not profit from playing hide the ball with cellphone bills,” Bruning said.
A recent Senate Commerce Committee report found that telephone companies receive part of the fees from third-party charges, which Verizon described as a flat fee between $1 and $2 per charge. The report said the companies place about 300 million third-party charges on their customers' bills, amounting to more than $2 billion in charges each year.
The Federal Communications Commission last year tightened the rules for landline bills and now requires third-party charges to be in a separate section of the bill. It didn't implement the same requirements for wireless carriers because the agency didn't see cramming as a big problem, Lynn Follansbee, an FCC attorney adviser, said at the roundtable.
In April the FTC filed its first case against mobile phone cramming and took legal action to shut down Wise Media LLC, an operation that allegedly took in millions of dollars by placing $9.99 charges on consumer' phone bills. The defendants allegedly billed consumers for services that sent text messages with horoscopes, flirting, love tips and other information.
Many consumers don't notice the charges. For example, thousands of consumers are complaining on the Internet about being charged $9.99 a month for “mobile purchases” after receiving what they say are unsolicited and unwanted text messages from “Love Genie tips,” a website that says it offers flirting tips.
Rosenthal said cramming typically occurs after a consumer signs up for a sweepstakes or enters a contest and enters his or her phone number. Although the consumer receives a text message, the disclosures are not clear.
Consumers can contact their cellphone provider and request that all third-party charges be blocked, Rosenthal said, and that will keep it from happening.
World-Herald staff writer Barbara Soderlin contributed to this report.