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Report: Cramming costs ‘hundreds of millions’

By Claes Bell, CFA · Bankrate.com
Wednesday, July 30, 2014
Posted: 5 pm ET

A new Senate committee report finds those pesky unknown charges on your cell phone bill are more common than you may think.

Wireless "cramming" -- the practice of loading up consumers' mobile bills with charges for services they don't want, without their consent -- has cost Americans "hundreds of millions" of dollars and is widespread across the industry, according to a new report by the Senate Committee on Commerce, Science and Transportation.

Charges are crammed on to customer bills by 3rd party providers, many of whom provide "premium short message services," a fancy way of saying "idiotic horoscope texts and other garbage." Many victims of these schemes contact their wireless providers and request that the charges get removed, but others never notice, obediently paying the fraudulent charges every month.

A 2013 survey conducted by the Office of the Attorney General of Vermont and cited in the report found "60 percent of respondents reported that the third-party charges found on their wireless telephone bills were unauthorized."

Recently, the FTC filed suit against wireless provider T-Mobile over the practice, and there have been numerous suits filed against phone companies at the state and federal levels in the past.

How they get you
So how do consumers get ensnared in these services in the first place?

According to the report, here's how it typically happens: A consumers responds to some kind of ad offering to let them download a song or get some other freebie if they text to a certain number or provide their mobile phone number in an online form. After consenting again via text message (or not, in some cases), consumers are then enrolled in a subscription service that hits them for a fee every month.

Here's an example cited in the report:

mobile-blog-olive-garden-coupon

There are variations on the scheme, but the end result is millions of dollars being siphoned out of consumer pockets and into unscrupulous crammers' pockets, and into the pockets of major mobile carriers, who get a 30 percent to 40 percent cut of the proceeds.

"Industry has gained substantial profits from third-party wireless billing while providing consumers inadequate protections against deceptive and fraudulent charges on their wireless bills," according to the report.

A future of fraudulent fees?
And the problem could get even worse. The rise of "direct carrier billing," where consumers pay for purchases in app stores and other retailers with their phone and have it put directly on their phone bill, could provide even more opportunities for consumer fraud, according to the report.

So what's the upshot? Be careful who you give your mobile number to, and don't confirm anything with a vendor over text until you're 100 percent sure you know exactly what you're getting into. And always, always keep a close eye on your mobile phone bill for unauthorized charges.

Follow me on Twitter: @ClaesBell.

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19 Comments
Paul
August 21, 2014 at 11:59 am

One way to help cut down on these additional fees is switch to a prepaid plan. Ya, I know- prepaid plans are for the folks with bad credit, right? Wrong. My plan is $30/month (yes, unlimited everything can be had for $60/month), and that's what I pay- $30. No taxes, surcharges, annoying add-ons and the like. I have unlimited nationwide talk/text, and 500 MB of data per month (iPhone, but I use wifi more than cellular data). Best of all it uses AT&Ts network, but isn't through AT&T. Do some searching, you might be amazed at what you find in the prepaid world. Clearly prepaid plans wont work for all situations, but its worth a look in saving some $$.

Duplicate
August 19, 2014 at 4:14 pm

@ Barbara Peddie-August 01, 2014 at 2:38 pm

Waste of time to SCREAM at people. No wonder AT&T isn't listening...

Nancie 2yelld2truth
August 01, 2014 at 6:17 pm

@Glen, it’s called “FORCED DONATION/S” We do it when we buy OVERPRICED MILK too & we are on a small income, so this is the ignorant Gov we pay for at low life’s who live better then we at their service period! I repeated told my hubs to get rid of ComCast…u can’t even understand the broken English from far away people who disrespect us in the 1st place. There’s always a way around things if you get crafty, if y’all want to know my trick_ask. Keep 3 steps ahead of the scumbags that we are forced to do. We just keep getter smarter & its their fault. Ha ha ha~

glenn terris
August 01, 2014 at 4:14 pm

COMCAST. Land line. If you see an increase or charge you don't recognize, question it. Most of the time they have no answer other then" it was a discount that ran out. I can fix that." All of a sudden, the charge disappears. Isn't that strange. I feel sorry for the elderly (and others) that pay without questioning the charge. Sounds like fraud to me.

Ken.T
August 01, 2014 at 3:20 pm

People this is not just cell phones!! land lines as well I kept seeing a unexplained charge of almost $1.25 per month I kept asking till I got a manager that knew I was not going away THE ANSWER THE FEDERAL GOVERNMENT TOLD US WE HAVE TO ADD THIS CHARGE AND IT'S FOR PEOPLE THEY SAY CAN'T AFORD A PHONE I SAID YOU MEAN I AM PAYING FOR SOMEONE ELSE TO MAKE CALLS WITH OUT MY PERMISSION
THEIR ANSWER THEIR THE GOVERNMENT WHAT DO YOU THINK SO with even cell phones even if the government did DO ANYTHING you will not get back one penny the government gets it so just bend over you know how it goes

Pat Ring
August 01, 2014 at 2:58 pm

3rd Party phone add ons.
I was a victim once. The phone companies play dumb or innocent when questioned.

Very simple the laws that rule phone service via any method should be restricted to NO third party billings. As in NO! I am sure there are plenty of rules and regs; one more won't matter.

Obviously the phone service companies do not monitor and if one is to guess they more then likley have an incentive of a certain percent(%)off the top or back to them at a later time.
par

Lady Anne
August 01, 2014 at 2:41 pm

Our cells phones are through Tracphone - pay as you go. It's not a Smart Phone, but I don't need all those bells and whistles - especially after reading stuff such as this.
Our landline is with Vonage, which gives us free long-distance to all of North and South America, plus UK, Italy and Germany. We pay 2 cents a minute to call anyplace else. $25 a month, plus tax. That's it.
Get on the bus, Gus.

Barbara Peddie
August 01, 2014 at 2:38 pm

PLEASE ADD AT&T MOBILITY TO THE LIST OF COMPANIES THAT ARE FRAUDENTLY ADDING CHARGES TO BILLS WHEN THEY HAVE NOT BEEN AUTHORIZED. I'M DEALING WITH THEM NOW TO GET A MONTHY CHARGE OFF MY BILL OF $20.00 OR MORE PLUS TAX NOT WAS ADDED TO MY NEW BILL WHEN MY HUSBAND AND I PURCHAED NEW SMART PHONES TO UPGRADE OUR OLD ONES. THEY AHVE NO CONCERN FOR THE CUSTOMER & THIS AMOUNT WAS ADDED TO OUR BILL UNKNOWINGLY TO US. YES, WE SIGNED ANY NUMBER OF PAPERS BUT WERE NOT MADE AWARE THAT THIS CHARGE WAS ADDED. WE ARE ON A FIXED INCOME ARE LUCKY TO PAY FOR THE NEW PHONES AND THOSE CHARGES WITHOUT ADDING SOMETHING WE DID NOT NEED OR WANT. I TALKED TO CUSTOMER SERVICE A NUMBER OF TIMES AND WILL NOT BE TALKING TO THEM AGAIN - WHATEVER HAPPENED TO THE "CUSTOMER" AND OUR NEEDS BEING MET. IF IT IS NOT TAKEN OFF OUR NEXT BILL - WE WILL TAKE SOME OTHER MEASURES AND WE WILL NOT BE PAYINT THIS EXTRA AMOUNT. WE HAVE BEEN GOOD, HONEST CUSTOMERS OVER THE YEARS. THEY SAY WE ARE PART OF THEIR "FAMILY" I DONT THINK SO - THIS IS NO WAY TO TREAT A "FAMILY" MEMBER OF GOOD STANDING. I DON'T WANT TO BE A PART OF THEIR FAMILY AND WILL JUST CANCEL OUR SERVICE. WE'LL GIVE THEM ANOTHER CHANCE TO RESOLVE THIS AND, THEN NOT ONLY WILL THEY NOT GET $20.00 - THEY WILL NOT GET OUR SERVICE AND THE AMOUNT THEY WOULD HAVE BEEN GETTING. HEY, SO BE IT. I HOPE THE AG'S OFFICE IS AWARE OF WHAT THESE COMPANIES ARE DOING TO CUSTOMERS.

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