After A Ten Year Nap The Government Wakes Up On Cramming, Finally Holds Big Carriers Accountable (Sort Of)

from the better-late-than-never dept

Mon, Dec 22nd 2014 2:28pm — Karl Bode

Most people are familiar with the practice of cramming -- or suddenly waking up one day to find your wireless phone bill stocked with $10 per month services (usually horoscopes, "premium text message" or ringtones) you didn't ask for and don't want. While the government has occasionally come down hard on the small companies engaging in these scams because they're easy legal wins, it has historically left the big carriers (and campaign contributors) alone, despite the fact that AT&T, Verizon, T-Mobile and Sprint all turn a blind eye to the practice in exchange for up to 40% of the proceeds. After a deep slumber, the government has finally started taking bigger companies to task, even if it's a day late and more than a few dollars short.

Back in October, the FTC announced it had struck a $105 million settlement with AT&T, with an investigation finding that not only did AT&T turn a blind eye to crammers and the mountains of consumer complaints, it actively worked to make getting refunds more difficult. The telco also intentionally made bills more confusing so customers would have a harder time figuring out that they were being ripped off:

"The structure of AT&T’s consumer bills compounded the problem of the unauthorized charges, according to the complaint, by making it very difficult for customers to know that third-party charges were being placed on their bills. On both the first page of printed bills and the summary of bills viewed online, consumers saw only a total amount due and due date with no indication the amount included charges placed on their bill by a third party. The complaint alleges that within online and printed bills, the fees were listed as “AT&T Monthly Subscriptions,” leaving consumers to believe the charges were part of services provided by AT&T."

AT&T's not alone. Rumors indicate that Sprint is about to face similar penalties, and it seems like only a matter of time before Verizon joins the party. The FTC has also struck a settlement deal with T-Mobile that has the "uncarrier" paying $90 million in consumer refunds, $18 million in fines and penalties to the attorneys general of all 50 states, and another $5 million in fines to the FCC. Despite their recent reputation for consumer friendly behavior (the company said the FTC's allegations were "unfounded and without merit" earlier this year), T-Mobile, like AT&T, made getting refunds nearly impossible and intentionally made the charges hard to see on consumer bills:

"According to the FTC’s July complaint, T-Mobile’s phone bills made it nearly impossible for consumers to find and understand third-party subscription charges. The FTC’s complaint against T-Mobile noted that in many instances information about the third-party charges crammed on to customers’ bills was buried deep in phone bills that totaled more than 50 pages in length."

Of course if you figure out that carriers were getting 40% of $10 per month charged to tens of millions of customers for more than a decade, the fines don't even come close to the amount of money these companies made by ripping off their subscribers. Better late than never?

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Filed Under: carriers, cramming, fcc
Companies: at&t, sprint, t-mobile, verizon

21 Comments

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That One Guy (profile), 22 Dec 2014 @ 2:08pm

Not so much, no
Better late than never?

No, not really. They're getting a minor slap on the wrist and allowed to keep almost all of the profits they made off the practice. If anything, that's likely going to increase the prevalence of the scam, as the carriers now know that even when they get caught it's still incredibly profitable for them.

The fines are so low in comparison to what they're being fined for, that they are less punishment and more encouragement to keep on with the scummy practice.
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- Anonymous Coward, 22 Dec 2014 @ 3:18pm
  
  Re: Not so much, no
  On the other hand, if they continue these practices after they've already paid a settlement, they're probably going to end up paying substantially more, because now there's proof that they were aware of this and that they knew it was wrong.
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  - That One Guy (profile), 22 Dec 2014 @ 4:11pm
    
    Re: Re: Not so much, no
    Oh indeed, they might have to pay a fine that would amount to 2% of the profits they made from their involvement in the scam, rather than the under 1% they paid out this time.
    
    If the government agencies handing out the fines don't care enough to punish them the first time, what makes you think they'd suddenly grow a spine and punish them the second/third/fourth time?
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  - Anonymous Coward, 22 Dec 2014 @ 5:22pm
    
    Re: Re: Not so much, no
    Some health insurers have paid the same fines for the same thing on a regular basis. You can extend that to financial services and the energy industry (oil and coal). Why would this be different? It's another reason to up the phone bill. Thanks gov.
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- Anonymous Coward, 22 Dec 2014 @ 5:18pm
  
  Re: Not so much, no
  Health insurance companies consider such fines more as "operation expenses" and pass them on to customers. For some reason, I doubt these fines will prevent teleco's from doing the same.
  
  I'm getting tired of fines for breaking the law. It's long past time to see some CEO's and BOD's loose their jobs and held accountable with jail time like the rest of us 90%-ers would get if we tried anything similar.
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  - That One Guy (profile), 22 Dec 2014 @ 10:49pm
    
    Re: Re: Not so much, no
    Fines would work, if they were proportional.
    
    If a company makes $100 million off of a scam, then the absolute minimum they should be fined should be $100 million. If a fine completely wiped out any profits a company made from a scam, then it would also eliminate any incentive, as there would be no profit in it.
    
    Until fines reach that point however, they're little more than minor inconveniences to large companies, who will happily pay out $10 million, keep the other $90 million they made, and continue on, business as usual.
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pixelpusher220 (profile), 22 Dec 2014 @ 2:45pm

Never seen it?
Do people not check their bills every month? Having had land/cell phone service for well over 20 years, I've literally never seen this happen to me. Which of course means it never happens to anyone! haha.

but seriously, wouldn't calling the company and saying 'That is not authorized' be the end of it? Annoying sure, but checking your bill for accuracy is a simple step when I'm going to be giving out my money :)
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- That One Guy (profile), 22 Dec 2014 @ 2:50pm
  
  Re: Never seen it?
  First you have to know that the extra padding on your bill is by a third party, not just another part of your bill, something that they apparently made very difficult to learn.
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  - pixelpusher220 (profile), 22 Dec 2014 @ 4:38pm
    
    Re: Re: Never seen it?
    again, I look closely at my bill almost every month and I know what the charges *should* be...a $10 increase in any month is going to be noticeable by anybody paying attention isn't it?
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    - Anonymous Coward, 22 Dec 2014 @ 5:38pm
      
      Re: Re: Re: Never seen it?
      Ever hear of "Sure Pay" or "Bill Pay"? I wouldn't be surprise if way over 60% of customers are using some form of automatic payment system such that they get lazy and stop looking at bills. The price for a non-payment or late payment in some cases are too high to risk not doing automatic payments.
      
      Personally I would never give access to my checking account for automatic payment to any bill. But when I question my friends, some fairly thrifty and knowledgable, they do.
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- New Mexico Mark, 22 Dec 2014 @ 6:58pm
  
  Re: Never seen it?
  We register a lot of things in the name of our dog (with our last name). Because of that our dog gets way more junk mail than we do.
  
  A few years ago we had bogus charges start showing up on our phone bill. When we called AT&T to dispute the charges, they said an authorized family member had subscribed to the services. When we asked who, they gave us our dog's name.
  
  Without saying why, we said that we knew 100 percent for certain that "person" had not authorized the charges and we would prove it in court. The customer rep immediately backed, down and refunded the charges. However, it wasn't until the threat of court that they did so. Needless to say we're not with AT&T today, but it sounds like they're all crooks at this point.
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Anonymous Coward, 22 Dec 2014 @ 2:46pm

"more than a few dollars short"

So the government is basically saying sure, you can scam people, but you must give us our cut of the proceeds. Scam the public out of $100 through hidden charges and we will fine you $10 of it. Rinse and repeat and it becomes a mutually beneficial relationship.
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Anonymous Coward, 22 Dec 2014 @ 2:50pm

Like all fines to large corporations this is a very weak and meaningless slap on the wrist that's come far to late. Even if you figure it happened to only 10 million customers, highly unlikely it was that few though, that works out to about $4.8 billion profit for them so a $100 million fine now is completely worthless and will only make the problem worse. They know they can rip everyone off and maybe get a token fine years or even decades later after they've made many billions off it so there's really no downside for them to keep on doing it.
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BentFranklin (profile), 22 Dec 2014 @ 3:21pm

This is why I will never go paperless on my bills. Just try to see a three-year-old bill on anyone's paperless system. You'll be lucky if you can see more than three months back.
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- pixelpusher220 (profile), 22 Dec 2014 @ 5:21pm
  
  Re:
  Fair, though the vast majority allow you to download your bills. Just go check every few months and download them.
  
  That said, I always prefer paper too :)
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- Anonymous Coward, 22 Dec 2014 @ 5:43pm
  
  Re:
  Utilities are getting clever with electronic "go green" billing. I added a gas account into my bill pay, the account number can up and I clicked "ok". Somehow that signed me up for paperless. The electric company adds a $5 charge for getting paper bills only they phrase it as a "discount" (BS).
  
  I think all phone carriers charge extra for the paper bill (again, not a "discount" imo).
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  - Anonymous Coward, 22 Dec 2014 @ 5:47pm
    
    Re: Re:
    BTW: My bill pay keeps records for years and I can get reports on what category or type of payment I've made. It comes in very handy for a free service. I don't know how I'd keep that organized anymore now.
    
    There's probably a full generation walking around with no idea how to deal with paper records. Sometimes I feel so old.
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Anonymous Coward, 22 Dec 2014 @ 8:56pm

Every three to six months I would call my cellular carrier and complain about my bill. The price quoted at purchase was approximately 50 dollars a month. Every three to six months the bill would be back up around 70 dollars. After paying the bill and speaking with billing the price would drop, only to rise again in the near future. Basically the cell phone was used for 25-50 calls a month, no internet and minimal text messages (10-20 per month). After a few years of this I called to terminate the service, and only got them to reluctantly agree only after stating "I need to learn to live without a cell". My final bill was paid in full and service was cut off almost immediately, of course they sent another bill via snail mail, but never a follow up on that one. I only wish I had sent them packing years earlier when my contract expired. I will never own another cell phone, so help me God, maybe a pager some day, if such a thing still exists. Thanks for the life lesson Big-T. Thanks for the 100 dollar local call too.
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Reality bites, 23 Dec 2014 @ 6:02am

The government thieves don't like competition.
The feral government has known about it since it started, but thieving psycho's protect each other until they start competing for victims.
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limbodog (profile), 23 Dec 2014 @ 8:50am

Wrong word
When the governing body demands a payment less than the value of the amount gained by the practice, that's not punishment, that's "taking a cut."
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- WOWFreeStuff (profile), 3 Jan 2015 @ 2:39am
  
  Re: Wrong word
  Agree 100%
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