Cramming on Mobile Phone Bills: A Report on Wireless Billing Practices

July 30, 2014

WASHINGTON, D.C. – Senator John D. (Jay) Rockefeller, IV, Chairman of the Senate Committee on Commerce, Science, and Transportation, today released a majority staff report on the findings of the Committee’s investigation into wireless cramming – where consumers get charged on their phone bills for goods and services they never agreed to purchase.

The new report titled, “Cramming on Mobile Phone Bills: A Report on Wireless Billing Practices,” describes a billion dollar industry that has cost consumers hundreds of millions of dollars in unauthorized charges on their wireless bill while at the same time yielding tremendous revenues for the major wireless carriers. Cramming became a problem several decades ago when phone companies opened their billing platforms to allow third-party vendors to charge consumers for goods and services unrelated to their phone service such as photo storage, voicemail, and faxes.

Quote attributable to Chairman Rockefeller: “For as long as they have been giving outside parties access to their customers’ bills, the major phone companies have assured Congress and the public that they are protecting their customers from billing fraud. Industry representatives told us that their voluntary policies and practices provide consumers – and I quote – a ‘robust process designed to protect customers from unscrupulous actors,’ and that cramming on wireless phones has been ‘de minimis.’ But this report makes it clear that is not the case. Cramming on wireless phones has been widespread and has caused consumers substantial harm.”

Rockefeller launched the Committee’s inquiry into wireless cramming after the Committee’s 2010-2011 landline cramming investigation found that widespread cramming had occurred on consumers’ landline phone bills and could have cost consumers billions. Since then, despite public assurances from industry that its self-regulatory system is effective at protecting consumers from unauthorized third-party charges on their phone bill, cramming on wireless phone bills has continued.

The report was released ahead of today’s Full Committee Hearing titled, “Cramming on Wireless Phone Bills: A Review of Consumer Protection Practices and Gaps.”

Key findings from the report, “Cramming on Mobile Phone Bills: A Report on Wireless Billing Practices”:

 

·        Third-party billing on wireless phone bills has been a billion dollar industry that has yielded tremendous revenues for carriers. AT&T, Sprint, T-Mobile, and Verizon generally retained 30-40 percent of each vendor charge placed.

·        Despite industry assertions that fraudulent third-party wireless billing was a “de minimis” problem, wireless cramming has been widespread and has likely cost consumers hundreds of millions of dollars.

·        The wireless industry was on notice at least as early as 2008 about significant wireless cramming concerns and problems with third-party vendor marketing tactics, yet carriers’ anti-cramming policies and sometimes lax oversight left wide gaps in consumer protection:

o   Consumer billing authorization requirements known as the “double opt-in” that were touted as safeguards by industry were porous, and multitudes of scammers appeared to have repeatedly skirted them.

o   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% of monthly revenues.

o   Carriers placed questionable reliance on billing aggregators in monitoring conduct of vendors that were charging consumers on carriers’ billing platforms. 

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