Senate Investigation Uncovers ‘Widespread’ Bogus Cell-Phone Charges

Mobile “cramming” cost Americans hundreds of millions of dollars.

Telephone bills, which contain information for an AT&T customer, lie in a pile May 12, 2006 in Chicago, Illinois.
National Journal
Laura Ryan
July 30, 2014, 12:56 p.m.

Mo­bile-phone scams have cost Amer­ic­ans hun­dreds of mil­lions of dol­lars over the past sev­er­al years, ac­cord­ing to a new re­port from the Sen­ate Com­merce Com­mit­tee.

Un­au­thor­ized charges by third-party vendors on con­sumers’ phone bills for ser­vices such as celebrity gos­sip, horo­scopes, or fake con­tests — com­monly known as “cram­ming” — is much lar­ger than pre­vi­ously re­por­ted, ac­cord­ing to the re­port re­leased Wed­nes­day.

Con­sumers’ losses are mo­bile-phone com­pan­ies’ gains. The re­port finds com­pan­ies such as Ve­r­i­zon, AT&T, T-Mo­bile, and Sprint reap the be­ne­fits of this fraud­u­lent activ­ity, gen­er­ally keep­ing up to 40 per­cent of the charges.

Mo­bile car­ri­ers al­low third-party vendors to charge con­sumers for ser­vices like mu­sic and app down­loads and char­ity or polit­ic­al dona­tions dir­ectly through their phone bill.

The wire­less in­dustry has ad­op­ted vol­un­tary meas­ures to pro­tect con­sumers from fraud, said Mi­chael Altschul, gen­er­al coun­sel for cell-phone lob­by­ing group CTIA, dur­ing a hear­ing on the top­ic Wed­nes­day.

But Sen­ate Com­merce Com­mit­tee Chair­man Jay Rock­e­feller says they are not do­ing enough.

“In­dustry rep­res­ent­at­ives told us that their vol­un­tary policies and prac­tices provide con­sumers — and I quote — a ‘ro­bust pro­cess de­signed to pro­tect cus­tom­ers from un­scru­pu­lous act­ors,’ and that cram­ming on wire­less phones has been ‘de min­imis,’ ” Rock­e­feller said in a state­ment Wed­nes­day. “But this re­port makes it clear that is not the case.”

Un­wanted third-party charges are of­ten dif­fi­cult to de­tect. Cus­tom­ers who do no­tice un­wanted charges of­ten face an up­hill battle to re­fund lost money, be­cause phone bills do not have the same fraud pro­tec­tions as cred­it cards.

The Sen­ate study comes two days after the Fed­er­al Trade Com­mis­sion re­leased five re­com­mend­a­tions to mo­bile car­ri­ers to crack down on cram­ming, in­clud­ing giv­ing con­sumers the op­tion to block third-party charges, clearly dis­play­ing third-party charges on phone bills, and mak­ing it easi­er for con­sumers to re­solve charge dis­putes.

The FTC filed a com­plaint earli­er this month against T-Mo­bile for pla­cing mil­lions of dol­lars worth of un­wanted charges on cus­tom­ers’ phone bills.

T-Mo­bile CEO John Legere said the FTC’s com­plaint was “un­foun­ded and without mer­it.”

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