(Hartford, CT) - U.S. Senator Richard Blumenthal (D-Conn.) issued the following statement today in response to a $105 million consent decree reached by the FCC, FTC and 50 states with AT&T to settle allegations of mobile “cramming.”
“Cramming” refers to the unscrupulous practice by phone companies and wireless carriers of adding unauthorized third-party charges onto bills.
“This consent decree sends a strong message to wireless carriers and crammers that this insidious practice will not be tolerated. Carriers who continue to profit from allowing third-parties to deceive their customers through cramming must take notice and reform their practices immediately—or face harsh penalties. Unauthorized and unscrupulous third-party charges—hidden in bills through vague and deceptive language—have robbed consumers of billions of dollars. Voluntary guidelines have failed to curb this pervasive nuisance, and even with this consent decree, strong federal regulations and ongoing oversight are needed,” Blumenthal said.
The cramming scourge first began in the 1990s, when telephone companies began adding unauthorized third-party charges onto phone bills for generic-sounding services and fees, including things like subscription charges, member fees or minimum use fees. At the time, the Federal Communications Commission attempted to fix the problem through a series of voluntary guidelines for the telecommunications industry. “Truth-in-Billing” regulations required the disclosure of third-party charges on all phone bills. Years later, the problem continues to impact millions of customers, and has now spread to wireless carriers, who have added third-party charges onto bills for unauthorized services and expenses including horoscopes, trivia, and ringtones.
An investigation and report by the Senate Commerce Committee has provided overwhelming evidence that cramming on wireless phones has now become widespread and caused consumers substantial harm. Specifically, this report issued in July found that third-party wireless billing has been a billion dollar industry that has yielded tremendous profits for the four largest wireless carriers, AT&T, Sprint, T-Mobile, and Verizon. The cut that these carriers received was often 30%-40% of each vendor’s charge.
What’s more is that the wireless industry was on notice about significant wireless cramming problems by the late 2000’s, yet they let the abuses continue. Documents obtained by the Committee show carriers allowed vendors with repeatedly high monthly consumer fraud rates – where refund requests often topped 50 percent of monthly revenues – to continue to bill their subscribers.
Blumenthal is a co-sponsor of the Fair Telephone Billing Act which would bar any local exchange carrier or provider of interconnected VoIP services from placing any third-party charge on a customer’s bill – unless the charge is for a telephone-related service, like a long distance or collect call, or a “bundled” service, like satellite television service, that is jointly marketed or sold with a company’s telephone service.
Visit the FTC website for additional information on how to prevent and spot cell phone cramming, and what to do if you identify an unauthorized charge on your bill.