Lawmakers are cracking down on those mystery charges that bring in some $2 billion a year in revenues for phone companies – landline and mobile.
After a lengthy investigation, the U. S. Senate Commerce Committee released a report this week entitled "Unauthorized Charges on Telephone Bills.”
Committee members proposed new rules in the report that will make it easier to detect "mystery fees" that include voice mail, call forwarding, and other features on phone bills.
"As the technology and sophistication of con artists and scammers increases, best practices must evolve, and all parties in the billing chain need to elevate efforts to prevent consumer fraud," Walter McCormick, president of the United States Telecom Association, said in a statement on Wednesday.
Phone companies place about $300 million third-party charges on bills each year, according to the report.
"Over the past five years, telephone companies have placed more than $10 billion worth of third-party charges on their customers‘ landline telephone bills,” the report said.
“Most people don’t know what they are and they just pay them blindly,” Jordan Goodman, a personal finance expert, said in an interview.
“This is going to make it much clearer. Hopefully, it should help people save money and not be ripped off.”
The act of placing phony charges on consumers’ phone bills is commonly referred to as “cramming.”
Cramming is an illegal practice of billing consumers a few additional cents on monthly bills so the customers will not care to check before paying.
In an effort to rein in cramming, the Federal Communication Commission also unveiled proposed rules this week, including one that would require landline phone companies to clearly give customers the option to block third-party charges.
Last month the FCC proposed $11.7 million in penalties against four companies accused of cramming tens of thousands of customers. The companies include: Main Street Telephone, VoiceNet Telephone, Cheap2Dial Telephone and Norristown Telephone.
The FCC said an estimated 15 to 20 million American households may be victims of mystery fees on their phone bills every year.
“Cramming attacks consumers in the pocketbook, where it really hurts,” Michele Ellison, an enforcement official at the FCC, said in a statement.
“We are taking actions to protect thousands of consumers who appear to have been hoodwinked into paying for services they never wanted, ordered, or used.”
The FCC recently reached a $50 million settlement with Verizon Wireless for “mystery fees” placed on bills by Verizon.
Verizon, which is owned by Verizon and Vodafone, said in a statement to the FCC that it would refund the phony charges and make a voluntary payment of $25 million to the U.S. government.
Verizon denies that it tolerates cramming and said out of the 1 million bills that include third-party charges each month in cramming complaints represent less than 1 percent of overall bills, according to the FCC.
Lawmakers tracked the origins of the problem back to the 1990s, when telephone companies allowed customer accounts to be used as a sort of credit card.
The Senate’s report reveals that consumers and businesses could purchase products or services with their telephone numbers and the charges for the services would later appear on their telephone bills.
What consumers can do if they suspect cramming by their phone company:
Consumers are encouraged to scour their telephone bills each month in search of mysterious charges.
- The FCC encourages customers ask themselves these four questions:
- Examine phone bills to see if you recognize the names of all the companies listed on the bill
- Ask the company if services were provided by the listed companies
- Look at the bill to see if there are charges for calls you did not place and services you did not authorize
- Are the rates and line items consistent with the rates and line items that the company quoted
- Customers should keep a record of telephone services they have signed off on and carefully read the fine print before authorizing new ones