CHARLESTON, W.Va.-- U.S. Sen. Jay Rockefeller said Wednesday that a "$2 billion a year scheme" to add unauthorized fees, often for unclear services, to millions of telephone bills has been going on for more than a decade.
People, businesses and government agencies have all been victims of the widespread scam, or "cramming," as Rockefeller calls it.
For more than a decade, phone companies have been allowed to do "third-party billing" -- billing for other companies. Victims of the scam are charged by these other companies for services they've never bought.
The added fees, usually for unclear services, are listed in small print on monthly telephone bills. Millions of people never notice them.
"This has been a national epidemic for more than a decade," Rockefeller said while chairing a Senate Commerce Committee hearing on Wednesday. "Why do phone companies allow it to happen?
"Telephone companies have received hundreds of thousands of complaints," he added.
At Wednesday's hearing, Illinois Attorney General Lisa Madigan said third-party billing is "an open invitation to fraud and deceit" and said she supports legislation to ban the practice altogether.
Vermont Assistant Attorney General Elliot Burg said, "We have been issuing subpoenas to third-party billing companies. In Vermont, 90 percent of people who responded to a survey had no recollection to have consented to being billed.
"Ordinary people do not expect third-party charges from unrelated companies to be placed on their phone bills," Burg said. "Without that awareness ... they are not going to scrutinize their phone bills to see if there is something to complain about."
The Federal Communications Commission recently called cramming "one of the most serious consumer problems in the industry."
Last month, the FCC estimated between 15 million and 20 million households become new victims of cramming annually.
Recent scams, the report revealed, included:
- Charging consumers' telephone bills for e-mail accounts and coupons they did not request or use.
- Charging consumers for collect calls that were neither made nor received.
- Charging consumers for long-distance telephone services they never ordered.
The Senate Committee released a special report on Wednesday, entitled "Unauthorized Charges on Telephone Bills," which is available at http://commerce.senate.gov.
CHARLESTON, W.Va.-- U.S. Sen. Jay Rockefeller said Wednesday that a "$2 billion a year scheme" to add unauthorized fees, often for unclear services, to millions of telephone bills has been going on for more than a decade.
People, businesses and government agencies have all been victims of the widespread scam, or "cramming," as Rockefeller calls it.
For more than a decade, phone companies have been allowed to do "third-party billing" -- billing for other companies. Victims of the scam are charged by these other companies for services they've never bought.
The added fees, usually for unclear services, are listed in small print on monthly telephone bills. Millions of people never notice them.
"This has been a national epidemic for more than a decade," Rockefeller said while chairing a Senate Commerce Committee hearing on Wednesday. "Why do phone companies allow it to happen?
"Telephone companies have received hundreds of thousands of complaints," he added.
At Wednesday's hearing, Illinois Attorney General Lisa Madigan said third-party billing is "an open invitation to fraud and deceit" and said she supports legislation to ban the practice altogether.
Vermont Assistant Attorney General Elliot Burg said, "We have been issuing subpoenas to third-party billing companies. In Vermont, 90 percent of people who responded to a survey had no recollection to have consented to being billed.
"Ordinary people do not expect third-party charges from unrelated companies to be placed on their phone bills," Burg said. "Without that awareness ... they are not going to scrutinize their phone bills to see if there is something to complain about."
The Federal Communications Commission recently called cramming "one of the most serious consumer problems in the industry."
Last month, the FCC estimated between 15 million and 20 million households become new victims of cramming annually.
Recent scams, the report revealed, included:
- Charging consumers' telephone bills for e-mail accounts and coupons they did not request or use.
- Charging consumers for collect calls that were neither made nor received.
- Charging consumers for long-distance telephone services they never ordered.
The Senate Committee released a special report on Wednesday, entitled "Unauthorized Charges on Telephone Bills," which is available at http://commerce.senate.gov.
David Spofford, CEO of Xigo LLC in Manassas, Va., testified his company has offered advice to businesses about telephone services for 20 years, including how to identify and avoid unauthorized charges.
"I have never seen cramming as bad as it is today," Spofford said. "Eighty percent of all businesses experience cram charges. But since the average cost is so small, people often simply just pay the charge."
The questionable "services" offered include saving voice messages, emails, directory services and Web posting.
"More than 99 percent of these charges are unauthorized by the customer and are for services they are not receiving," Spofford testified. "Large retail chains are particularly hardly hit."
Walter McCormick Jr., president and CEO of the U.S. Telecom Association, testified telephone companies "acknowledge the existence of a continuing problem -- one that impacts consumers and has continued for many years."
McCormick told the Senate committee members of his organization are willing to "cooperate in your efforts to eliminate cramming.... Consumers should not be charged for services they did not purchase."
Rockefeller said telephone companies themselves make about $200 million a year in fees paid to them by crammers.
He asked McCormick, "Why haven't you cleaned up this act?"
McCormick said, "I don't know the answer to that question. The industry has taken significant steps. There has been improvement, but it remains a very significant problem.
"Once you identify a scammer, the scammer comes back in another disguise, changing their name and changing the type of service they provide."
Today, most crammers focus on adding fees to telephone landlines, rather than cellphones. But Spofford said he believes things will soon "get much worse on the wireless side."
Reach Paul J. Nyden at pjny...@wvgazette.com or 304-348-5164.
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