Rockefeller Bill to Prohibit Third-Party Charges on Wireline Bills

Congress should determine what charges are permissible, “and then take the rest and just ban it,” Rockefeller said. The senator plans to introduce legislation on cramming “in the near future,” he said. He praised FTC efforts to stop cramming, and the FCC for seeking comment on a ban in a notice of proposed rulemaking adopted Tuesday (CD July 13 p1). The phone industry hasn’t made a “serious effort” to protect consumers, even though it promised to voluntarily address cramming, Rockefeller said.

Sen. Kelly Ayotte, R-N.H., appeared to support a ban. “Without a strict deterrent or fear of retribution for those scamming the public, we are not fully addressing the issue,” she said. Ayotte warned that there may be some legitimate third parties charging consumers, and she asked the phone industry and other stakeholders to provide examples of charges that may need to be exempted from any broad ban.

Cramming is a “continuing problem,” despite anti-cramming services offered by many telephone companies, USTelecom President Walter McCormick said. Industry will work with Congress and federal agencies to address the problem, he said. Telco fees levied on third-party charges amount to 0.1 percent of the phone industry’s total revenue, McCormick said. AT&T makes about $50 million per year from fees on all third-party charges, he said. Rockefeller called the industry figure a misleading “corporate point of view” that hides the cost to consumers.

Sen. Claire McCaskill, D-Mo., asked if telcos could provide PIN numbers to customers for each of their phone numbers. Customers would have to provide the PIN number to any third party before they could charge the customer based on the phone number, she said. McCormick said he'd run the idea by USTelecom members.

State officials supported a national prohibition of third-party charges on phone bills. Illinois Attorney General Lisa Madigan urged legislation banning all third-party charges. Allowing the charges is an “open invitation to fraud and deceit,” she said. Most consumers are unaware they are being charged, and those who do discover unauthorized charges usually get “the runaround” when they contact their phone companies, she said. All third-party charges Madigan has reviewed have been cramming, she added.

"Ordinary people do not expect” that third-party charges unrelated to their phone bill will be placed on their phone bill, said Elliot Burg, Vermont assistant attorney general. The state passed a prohibition this year with the support of local phone companies, and Vermont hasn’t received any negative feedback, he said. He suggested using the measure as a model for national legislation. Vermont previously had a law requiring third parties to notify consumers by mail about charges, but the measure was ineffective because people didn’t understand the problem and third parties sometimes evaded the requirements, Burg said.

Sen. Tom Udall, D-N.M., asked if wireless bills are also plagued by unauthorized charges. Cramming is more of an issue for landline, but it’s an increasing problem for wireless, said Xigo CEO David Spofford, whose company processes bills for telcos. For wireless, “it’s going to get much worse,” he said.

The committee probed the eight largest telcos in a year-long investigation. A “large percentage” of the 300 million yearly charges are unauthorized, the committee said. Telcos profit, too, and received $1 billion in revenue over the past decade, it said. Verizon, for example, gets $1 to $2 per third-party charge levied, the committee said. Consumers and businesses frequently report that telcos are not helpful in removing unauthorized charges, the committee said.

Many major U.S. companies are victims of cramming, including major telecom companies like AT&T and Level 3, the committee found. Other big-name victims include Microsoft, American Airlines, Citigroup, Visa, Lockheed Martin, Toyota, Best Buy and McDonald’s. The report and a complete list of confirmed victims is at http://xrl.us/cramming.

Cramming NPRM Released

Meanwhile, the FCC released the text of the cramming notice of proposed rulemaking approved Tuesday with Commissioner Robert McDowell expressing some reservations (CD July 13 p1).

Cramming may be a bigger problem than many recognize, the FCC asserts. “Reports of cramming likely understate the magnitude of the problem because consumers face significant challenges in detecting and preventing unauthorized charges on their telephone bills,” the NPRM said. “Because many consumers are unaware that third parties can place charges on their telephone bills, they fail to recognize the need to review their bills to identify charges for products or services they have not authorized.” The order mentions voluntary industry efforts to curb cramming, but notes that it remains a major problem. The NPRM cites the 2,000 to 3,000 complaints fielded by the FCC each year, complaints filed at the FTC and complaints by the states, including a filing by 25 state attorneys general, which “stressed the extent and seriousness of the cramming problem."

Wireless figures prominently in the proposed rules and is mentioned 88 times, by our count. CMRS is mentioned 33 times. “In the past, cramming has been a problem associated primarily with wireline telephone bills,” the NPRM said: “More recent evidence, however, raises a similar concern with unauthorized charges on CMRS bills, such as those of providers of wireless voice service. Therefore, we seek comment on whether we should extend any of the other proposed protections discussed herein to consumers of CMRS."

The NPRM suggests that the requirements imposed on carriers could be very specific. “We seek comment on the wording, placement, font size, and other relevant factors, at the point of sale, on bills, and on websites, that would be necessary” for notifications to effectively alert the public so that they could guard against cramming. “We seek comment on whether the disclosure should include identification of the specific kinds or categories of charges that would be blocked, and how those kinds or categories of charges should be described, as well as whether and how the disclosure should advise consumers of the charge, if any, for the blocking service.”