The Federal Trade Commission (FTC) warns mobile carriers against mobile cramming, the practice of charging customers with fees from third-party services they did not ask for, and has issued a report detailing the steps carriers can take to combat the multi-million dollar fraud.
This comes hot on the heels of the commission's lawsuit against T-Mobile, which it accused of placing unauthorized charges for goods and services from merchants on their bills and earning millions of dollars for the fraudulent practice.
"In six enforcement actions, the Commission has alleged that such practices have cost consumers many millions of dollars, and in just three of these actions, defendants have agreed to orders imposing judgments totaling more than $160 million," writes (pdf) the FTC in its report.
A study conducted by the Federal Communications Commission (FCC) says cramming has been around for as long as 10 years but has been limited largely to landlines. However, since mobile carriers have been allowed to charge for third-party services, cramming has become a persistent problem for mobile owners too. The FCC says that as many as 20 million customers are crammed every year.
Unfortunately, carriers and merchants make it difficult for customers to figure out these charges because they are usually small, sometimes charging as little as $1.99, and have names such as "service fee" or "monthly charge." As a result, only one out of 20 customers ever become aware that they are being charged for services they did not ask for. These services can range from anything such as flirting tips to diet programs and psychic hotlines.
"People don't see it, and if they do see it, they don't pay attention to it," says Joel Gurin, the FCC's chief of its Consumer and Governmental Affairs Bureau. "Month after month it adds up to millions of dollars across the country. Unfortunately, you cannot assume that every charge that's on your phone is a charge that should be there. The more we can make people aware of that and give them the tools to really deal with this problem, the more rapidly we'll see some major progress in the fight against cramming."
Among the commission's recommendations, the FTC says customers have the right to block third-party services if they wish to do so. Furthermore, mobile carriers should be responsible for obtaining their customers' express, informed consent before allowing third-party merchants to make charges on their mobile billing statements.
The FTC also recommends mobile carriers to make a clear disclosure of all third-party charges and provide a clear distinction between these and regular billing charges so that customers are aware of what they are paying for. For customers using prepaid plans, the FTC says mobile carriers should notify them every time a third-party service is deducting fees from their account.
Finally, the FTC says mobile carriers should provide an efficient process for customers to dispute charges, similar to the resolution process used for disputing unauthorized credit card charges. Although most major carriers have told the commission that they have a one-and-done policy in place, where their customer service representatives are given full authority to address refund requests, the FTC says this is not effectively put in practice, as many customers have reported difficult and inconsistent experiences when disputing third-party charges.
