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Cramming
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 Andy Cripe/Gazette-Times - Cramming victim Wayne Buck points out bogus charges on his phone bill Thursday morning at the Corvallis Gazette-Times. |
When Wayne Buck opened his October phone bill, he found a little surprise tucked away in the fine print on Page 9: a $49.95 charge for an Internet marketing service he says he never ordered.
“I almost missed it. At the bottom of the bill it said there’s a charge on the back side that isn’t the phone company,” he said. “And I thought, those dirty rats — somebody stuck a charge on there without any authorization or anything.”
Buck believes he was the victim of cramming.
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Cramming occurs when a company places unauthorized, misleading or deceptive charges on your phone bill, and it happens all the time — the Federal Communications Commission fields thousands of complaints about the practice every year. Oregon utility regulators tallied more than 400 such gripes in 2007.
The problem has been around for about a decade. It was spawned by a combination of factors, including the breakup of the AT&T telephone monopoly into regional Baby Bells, the deregulation of local and long-distance phone service and the proliferation of wireless carriers, Internet service providers and other technology-driven telecom businesses.
As consumers got used to seeing charges from a separate long-distance provider on their local phone bills, a new class of entrepreneur emerged: the billing aggregator.
For a fee, these middlemen handle the billing for ISPs, local phone service resellers, ringtone purveyors and a host of other companies by piggybacking their charges onto a consumer’s telephone bill. The phone company charges the aggregator a fee to bundle those charges with its monthly bills.
“Third-party billing is quite common,” said Bob Gravely of Qwest Communications, Buck’s phone company and Oregon’s largest telecom carrier. “Most of the time it’s not a problem at all. It’s a convenience for most people to get one bill instead of six.”
But those bills, as you’ve probably noticed, just keep getting longer and more complicated. With pages of line items detailing various taxes, service charges, option packages and access fees, they can be extremely confusing.
And that, say consumer advocates, has opened the doors for abuse.
Read between the lines
“The bills are very difficult to understand,” said Sue Macomber of the Utility Consumers Action Network [2], a San Diego-based advocacy group. “I have attorneys calling me that can’t understand the bills when they’re trying to help people.”
Many of the latest cramming scams target smart phones and other wireless devices with Internet connections, said John Breyault of Consumers Union, the nonprofit publisher of Consumer Reports magazine.
Users are invited to download “free” games or ringtones, only to discover they’ve unwittingly signed up for a subscription that gets tacked onto their phone bill. At anywhere from $2 to $5 a month, such relatively small charges can go unnoticed for a long time amid the welter of fees.
“On the one hand, you can say you should’ve read the fine print,” Breyault said of this new class of online commerce.
“But these companies that are doing this don’t make it easy to read the fine print. I don’t want to say that their business plan is to deceive, but they do make money on these things.”
Buyer beware
Oregon utility regulators say the best defense against cramming is to read your monthly phone bill closely and call the originating company about any charges you don’t understand. Usually they’re legitimate, but not always.
“It’s a brave new world,” said Bob Valdez, a spokesman for the Oregon Public Utility Commission. The combination of phone deregulation and the information technology revolution has given consumers a seemingly endless array of choices, any of which can wind up on a phone bill.
“That’s the bill you (should) look more closely at than anything else you get, because they just cram things in there,” said Jan Margosian, consumer information coordinator for the state Department of Justice.
While cramming can be the result of an honest mistake, Margosian said, it can also be an intentional attempt to defraud by shady operators who hope consumers won’t notice an unauthorized charge, will decide it’s too small to worry about or won’t be able to figure out how to get it taken off their bill.
“It’s illegal, both federally and state, but they do it anyway,” Margosian said.
Cramming complaints are down at both agencies from a few years ago, when they regularly led the annual hit parade of most frequent consumer beefs. That may be in part because consumers are more savvy about checking their bills and demanding satisfaction from service providers, but Valdez also thinks some of the worst offenders have been weeded out.
“There were some bad players out there that took advantage of the competition,” Valdez said. “The majority of players are straight up.”
Sticking up for consumers
The PUC fields most consumer cramming complaints [2] in Oregon and can usually resolve the situation. When it can’t, or if it detects a pattern of abuse, it refers the problem to the Department of Justice.
In the worst cases, DOJ will file suit to get a company to halt fraudulent or deceptive practices. Typically, those cases are resolved by an assurance of voluntary compliance, in which the company agrees to change objectionable business practices, make restitution to customers and do a better job of disclosing costs and other terms of service.
The company may also agree to pay a fine of up to $25,000 per violation. That money goes to fund enforcement activities by the department’s consumer protection division, which is chronically underfunded, said DOJ spokeswoman Stephanie Soden.
“We wish we could take every violator to court,” Soden said. “But we can’t, so we prioritize.”
In Oregon’s biggest cramming enforcement action to date, Qwest agreed in 2002 to pay $575,000 to settle claims that it put unauthorized charges on consumers’ bills and misrepresented wireless and DSL services.
“Qwest’s unethical practices railroaded new customers into paying increased fees for services they did not need,” Attorney General Hardy Myers said in a statement announcing the settlement. “Their practices were particularly predatory against the elderly and non-English-speaking ‘new connect’ customers.”
And yet this settlement, like all such assurances of voluntary compliance, carried no criminal penalties and contained no admission by the company that it violated any laws.
More work to be done
Some consumer advocates argue that those kinds of enforcement practices simply allow cramming to continue, with some companies viewing fines as just another cost of doing business.
“Cramming has been around for a decade now,” noted Breyault. “It’s a problem we continue to see.”
Raising the fines could help, he said, but big companies worry more about their public image than about legal costs.
“Attorney-generals’ offices do more good when they make a big deal out of it publicly,” he said.
Macomber agrees. She thinks mandatory reporting laws could help focus public attention on the problem.
“Every company should have to report every violation,” she said. “Constant exposure and constant pressure is the only way things change.”
Indeed, many telecommunications providers have started taking steps to police the practice themselves.
Qwest, for instance, requires aggregators to give notice of any new companies they want to bill for so the phone company can check them out, Gravely said. Companies that trigger complaints can be banned from billing through Qwest.
Customers who dispute third-party charges can have Qwest take them off their phone bills, no questions asked.
“At that point it becomes (a matter) between the customer and the provider,” Gravely said.
That’s the stage Wayne Buck’s in now.
ZWW, the California Internet company that put the $49.95 charge on his phone bill, agreed to cancel future service but insists he’ll have to pay the first month’s fee. Buck insists he never ordered the service, never used it and won’t pay. He’s filed a complaint with the state Department of Justice.
It’s not the money he’s worried about, Buck said. It’s the principle of the thing.
“I guess I’m not the only one (who’s been victimized by cramming),” he said. “But it’s time for them to stop.”
Bennett Hall can be reached at 758-9529 or bennett.hall@lee.net.