U.S. cellphone users frequent victims of 'cramming': Senate study

Charges often originate from companies that provide celebrity gossip, ring tones or similar services


WASHINGTON (Reuters) - U.S. mobile phone users have likely paid hundreds of millions of dollars in unauthorized charges "crammed" onto their bills, according to a report released by the U.S. Senate Commerce Committee on Wednesday to coincide with a hearing on the topic.

"Scammers figured out a way to beat the system," Senator Richard Blumenthal, a Connecticut Democrat, said at the hearing. "They have been absolutely relentless in doing so."

The cramming often originates with small companies that provide celebrity gossip, ring tones or similar services.

But the money is collected by cellphone providers, including Verizon, AT&T, T-Mobile US Inc or Sprint, owned by SoftBank Corp, which typically keep 30 to 40 percent of the revenue, the staff report found.

"Some carrier policies allowed vendors to continue billing consumers even when the vendors had several months of consecutively high consumer refund rates – and documents obtained by the committee indicate this practice occurred despite vendor refund rates that at times topped 50 percent of monthly revenues," the report found.

Speaking at the hearing for the carriers, Michael Altschul of CTIA - the Wireless Association, said that companies agreed that putting unauthorized charges on wireless bills was "wrong and simply not acceptable."

He said carriers had also been "victimized by fraudsters who crafted elaborate schemes to defeat the industry’s self-regulation and third-partying monitoring."

In November, AT&T Mobility, Sprint, T-Mobile US and Verizon said they would stop billing for a certain type of charge, premium SMS messages.

Vermont Attorney General Bill Sorrell, who led the states' push against the practice, said that decision made a difference. "Complaints to us have fallen off a cliff," Sorrell said.

Even so, another form of billing, direct carrier billing, was on the rise, said FTC Commissioner Terrell McSweeny.

McSweeny urged the companies to institute basic protections for consumers to prevent abuse of this type of billing, such as cutting off companies with high complaint rates and spelling out on wireless bills exactly what consumers are paying for.

In early July, a federal court in California shut down six companies accused of cramming more than $100 million in unauthorized charges on consumers' cellphone bills, according to the FTC.

The FTC also filed a complaint against T-Mobile, the fourth-largest U.S. wireless carrier, on July 1 accusing the company of charging customers for subscriptions to services, like flirting tips, which they never requested. It is asking the company to refund the unauthorized charges.

T-Mobile CEO John Legere said that the FTC had "sensationalized" the problem.

In statements, both Sprint and AT&T said they take seriously the problem of cramming seriously. Both also said that they refunded money to customers who had been cramming victims.

For the full Commerce Committee report see: http://tinyurl.com/lmwffv2

(Reporting by Diane Bartz; Editing by Ros Krasny, Dan Grebler and Bernard Orr)


Featured Big Data Reports

Market Opportunity: Big Data in the Internet of Things
Big Data and Analytics software and applications will play a crucial role in making IoT a success. The data generated through sensors embedded in various things/objects will generate massive amounts of unstructured (big) data on real-time basis that holds the promise for intelligence and insights for dramatically improved decision processes.


Structured and Unstructured (Big) Data in Telecom Analytics
This report provides the reader with a broad understanding of telecom data (structured and unstructured/big data) and related analytics. The report identifies market drivers and opportunities as well as forecasts for certain key growth areas such as deep packet inspection.


Telecom Carrier Big Data Operations, Applications, and Services
Telcos have a major advantage in that they have many sources of data but if they want to monetize that data and derive meaningful, actionable analytics it could be challenging due to the complexities of correlation, prediction, and the massive volumes of data from different sources.


Affordable Market Reports on Big Data, IoT, CDN & More!
Access the exclusive new series of market research reports brought to you through the partnership of Mind Commerce research and TelecomEngine.com.
Browse the latest titles




Featured Events & Partners

The Telecom Exchange (TEX)
Wednesday, June 24, 2015

Cipriani Wall Street, New York City

Designed to navigate enterprise and carrier network operators through all carrier hotels and colocation houses available in the US and globally.

Visit event website...