PUC Issues Fines in Phone ‘Cramming’ Cases
State regulators on Thursday handed out their largest fines to date against phone companies accused of billing customers for unauthorized services, approving fines and settlements totaling more than $8 million.
The biggest portion was a $6.5-million fine against Coral Communications Inc. of Florida, a company that duped consumers into signing sweepstakes forms that automatically enrolled them in pricey calling-card services.
In a second case, state regulators from the California Public Utilities Commission approved a $1.7-million penalty against USP&C; Inc., a Kansas City, Mo.-based billing company for telephone services.
State investigators said USP&C; illegally billed at least 33,654 California customers for services they never signed up for--a practice known as “cramming.”
For the PUC, the fines against Coral and USP&C; represent its boldest step yet in a new effort to crack down on telephone company abuses.
Still pending before the PUC is a complaint against Pacific Bell for alleged marketing abuses that could result in penalties of more than $40 million.
In the case against Coral Communications, PUC investigators said the company collected an estimated $6 million from 258,000 unwitting California consumers, 97% of whom never used the calling card. Nonetheless, Coral charged each customer a $2.99 set-up fee and then $6.99 per month for the card.
Coral, once based in Boca Raton, Fla., and now believed to be defunct, collected the money through a complex web of intermediary companies that billed consumers on Coral’s behalf.
The state PUC, which launched an investigation of Coral in August 1998, also discovered that Coral had never received regulatory approval to sell phone service in California.
It’s unclear how much money will ultimately be returned to Coral’s victims, because Coral and several other companies involved are insolvent. However, the PUC has ordered five companies known to have collected money on Coral’s behalf--including International Telemedia Associates, Telephone Billing Services Inc., OAN Services Inc., Accutel Communications, and Calling Card Plus Inc.--to return more than $4 million to customers.
In the USP&C; case, state investigators accused the company of repeatedly billing customers for such features as voice mail, toll-free numbers and other services--and then hiding the charges under vague and cryptic descriptions.
The commission ordered all California phone companies to cease passing along phone charges from USP&C; to customer bills, and ordered further proceedings on the question of customer refunds.
USP&C; disagrees with the commission’s decision. “This is just not a fair result,” said Sheldon Krantz, an attorney who represented USP&C; in the PUC case. “We will seek a stay [of the decision] from the commission.”
