Group Targets False Charges on Phone Bills
In response to growing complaints from consumers who are finding charges on their phone bills for services that they didn’t authorize, state regulators, consumer advocates and local telephone companies are meeting this week to draft proposed legislation to deal with “cramming.”
Authorities believe that new regulations are needed to deter firms from fraudulently billing consumers for Internet access, voicemail, paging, 900-number calls and personal toll-free-number services that they did not sign up for.
The increase in cramming, which earned its name because unauthorized services are most often crammed in inconspicuous places on phone bills, is so new that the Federal Communications Commission and local phone companies only recently started tracking complaints.
The charges, which range from $5 to $40 a month, usually end up on phone bills after a customer unwittingly fills out a sweepstakes form or signs up for a service with a telemarketer. Often, small print on sweepstakes forms will stipulate that the customer agrees to be billed for an optional phone service. Consumers have also been victimized when they called a 900 number and were inadvertently signed up for a subscription to that numbers’ services.
The California Public Utilities Commission hopes to pattern cramming legislation in part on a 1996 state law enacted to fight slamming--or the switching of a consumer’s phone service without his or her consent. Pacific Bell credits the anti-slamming law, which requires third-party verification when residents switch their phone service, for decreasing its slamming complaints by 55% in 1997.
“Customers need to openly and actively request services that appear on their bills,” said Jack Leutza, director of the California PUC’s telecom division. “If unwanted services end up on their bill, they should have the right to cancel the services and be excused from payment if they can prove they didn’t authorize them.”
Like other types of fraud prompted by the deregulation of the telecommunications industry, cramming is practiced by a small number of firms that dupe consumers and then promptly disappear, officials say.
Although the number of these complaints pales in comparison to the number of slamming complaints received last year, officials expect cramming to increase as competition in the local telephone market heats up.
“Unless there are some measures put in place to stop these fraudulent practices, they will continue to grow,” said Sandy McGreevy, regulatory manager for Pacific Bell. “A lot of these companies are not regulated by the FCC or the FTC.”
Consumer advocates say cramming legislation should not rely solely on the provisions of the anti-slamming law, which applies only to residential telephone service and not to businesses. Because of this, slammers have focused their efforts on small businesses, said Nettie Hoge, executive director for the Utility Reform Network.
After meeting this week, the anti-cramming coalition will take its recommendations to the California PUC for review at its Feb. 4 meeting. If the commission approves its guidelines, the group will look for a lawmaker who’s interested in writing and introducing a bill, Leutza said. The process will have to move fairly quickly because the deadline for introducing bills for the 1997-98 legislative session is mid-February.
The FCC, which regulates phone companies, says it’s considering regulatory action to combat cramming but has not yet devised a specific plan to address the issue. The FTC, which regulates the billing houses that issue phone companies’ bills and the firms these houses contract with, does not plan any action at this time.
Pacific Bell and GTE are paid by other companies to include charges for optional phone services on their bills. The local phone companies then hire clearinghouses to do their billing for them. To complicate matters, billing houses often have a tough time tracking down fraudulent firms and find it next to impossible to determine if a charge is legitimate or not.
While consumers most often contact their local telephone company about unauthorized charges on their bill, they should instead call the toll-free number listed on top of the bill to reach the phone company’s billing clearinghouse, McGreevy said.
When consumers contact a billing house about a questionable charge, they should ask who authorized the fees. If the billing house cannot prove that the fees were authorized, the customer can ask to have the charges removed from the bill, McGreevy said.
Pacific Bell is also considering stricter rules for its billing houses on accepting billing work from other companies, McGreevy said.
GTE, meanwhile, requires its billing houses to report when they receive a certain number of complaints about one of the firms they contract with. Then the billing houses must resolve the problem or lose its contract, said Larry Cox, a GTE spokesman.
The nationwide increase in cramming, which ranks fifth on a list of the top fraud complaints coming into the National Consumers League, has motivated consumer advocates to beef up their education campaigns.
There are several things consumers can do to protect themselves: read the fine print on sweepstakes entries; be sure to understand exactly what telemarketers are offering and how much it will cost; and get the telemarketer’s name, address and phone number in order to follow up on the call to check the offer’s legitimacy. Still, the most effective thing consumers can do, officials agree, is to keep track of charges on their phone bills.
Consumers can file complaints with their local telephone company, the FCC or the National Consumers League at (800) 876-7060.
“We want to encourage people to read their phone bills,” said Linda Golodner, president of the league. “This is the No. 1 thing we tell consumers to do.”
