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Senate Study: Problem Of Cellphone “Cramming” Charges Must End

August 1, 2014
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John Hopton for redOrbit.com – Your Universe Online

It has taken considerable time, but the widespread problem of cellphone companies allowing their customers to be victims of “cramming” charges may be coming to an end, following a new report by the U.S. Senate Commerce Committee.

The report found that hundreds of millions of dollars had most likely been paid in charges which cellphone users had not authorized, after third party fees were latched onto phone bills. The third party companies are often small and obscure, and provide services such as dating advice and celebrity gossip at premium rates. Very often, consumers will not be aware of the full extent of the costs involved, or even that they have signed up at all. Since the charges may be buried deep in lengthy phone bills, they can continue to be taken for significant periods without users’ knowledge.

The process, known as “cramming,” has drawn criticism to the cellphone carriers as well as third parties not only because the fees are paid directly from the bill, but because the carriers take a considerable cut of forty percent or more, and because the level of complaints and refund requests raises questions about how much they knew, and how little they did to put a stop to the issue.

As Bloomberg Businessweek points out, “This could be evidence of the ingenuity of the crammers,” but given the obvious advantages to carriers “the incentives are certainly a bit muddy.”

According to Reuters, the Senate report pointed out that “Some carrier policies allowed vendors to continue billing consumers even when the vendors had several months of consecutively high consumer refund rates – and documents obtained by the committee indicate this practice occurred despite vendor refund rates that at times topped 50 percent of monthly revenues.”

The long-standing scourge of cramming, which began on landline bills, has apparently not been stopped by industry self-regulation. William Sorrell, attorney general in Vermont, told the Senate committee that “Ultimately we realized that self-regulation did not work in the landline arena,” reports Joshua Brustein for Bloomberg. There have been 14 enforcement actions from the FCC since 2010, worth $122 million, three of which resulted in $10.5 million in penalties and payments to the U.S. Treasury in July.

T-Mobile, whose tangles with cramming drew attention to the issue in recent months when the FTC filed a complaint against them, has been defensive on the subject, with CEO John Legere saying that the FTC had “sensationalized” the problem. However, government attention seems to be having some impact across the four major providers.

In November 2013, AT&T Mobility, Sprint, T-Mobile US and Verizon all said they would stop billing for certain kinds of premium text messages. Since then, according to Sorrell, complaints had “fallen off a cliff.”

Speaking at the recent Senate hearing on behalf of the carriers, Michael Altschul of CTIA – the Wireless Association – said that the companies had been “victimized by fraudsters who crafted elaborate schemes to defeat the industry’s self-regulation and third-partying monitoring,” but also that they agreed that allowing unauthorized charges to make their way onto bills was “wrong and simply not acceptable,” reports Diane Bartz for Reuters.

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Source: John Hopton for redOrbit.com - Your Universe Online



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