FTC Steps Up Scrutiny on Mobile Bill Cramming in Georgia Lawsuit

FTC Steps Up Scrutiny on Mobile Bill Cramming in Georgia Lawsuit

“Cramming”—the practice of placing unauthorized and misleading charges on consumers’ telephone bills – is the focus of a lawsuit filed by the Federal Trade Commission (FTC) on April 16, 2013 in the United States District Court for the Northern District of Georgia.

The suit against Wise Media LLC, Brian M. Buckley and Winston J. Deloney, is the FTC’s first action targeting “mobile cramming.” The suit seeks injunctive relief and to freeze the defendants’ assets. It is part of the FTC’s focus on consumer protection issues arising from the growth of mobile technology, the agency said.

The complaint alleges that the defendants “are engaged in a widespread scheme to place unauthorized third-party charges on consumers’ mobile phone bills, a harmful and illegal practice known as ‘cramming,’” and claims that Wise Media and its owners have made millions of dollars from the practice.

Despite Federal Communications Commission (FCC) Truth-in-Billing rules requiring telephone companies to provide clear, non-misleading plain language in describing billed services, crammers use confusing telephone bills in an attempt to trick consumers into paying for unauthorized services.

The FTC suit is emblematic of the likely continuing regulatory focus on cramming and other potentially deceptive or harmful practices arising out of the widespread use of mobile technology.

On May 8, FTC staff is hosted a round-table discussion on mobile cramming with consumer advocates, industry leaders and government regulators to address how to protect consumers from the practice.

“The concept of ‘cramming’ charges onto phone bills is a not a new one,” said FTC Chairwoman Edith Ramirez. “As more and more consumers move to mobile phones, scammers have adapted to this new technology, and the Commission will continue its efforts to protect consumers from their unlawful practices.”

Cramming has long been a problem on landline telephone bills, the FTC said, and has been the subject of two dozen cases brought by the agency in recent years. Crammers often escape scrutiny by charging small amounts or describing the charges in a way to make them appear to be for telephone company services, such as voice mail or Web services. The FCC has cited recent studies showing that only 5 percent of consumers who were “crammed” were aware of the charges. The same studies, cited on the FCC’s website, estimate that as many as 20 million U.S. households per year are affected by the illegal charges on landline bills.

AT&T and Verizon recently announced that they would discontinue certain third-party billing on landline account statements in response to increased concern over cramming.

In the mobile cramming case filed April 16, the FTC said that Wise Media and its owners “operate a scam” in which they billed consumers for unauthorized text message–based subscription services. Consumers across the country allegedly were signed up for so-called “premium services,” apparently at random, and were charged $9.99 per month on a recurring basis, without their knowledge.

According to the complaint, in many instances, Wise Media sent text messages to consumers that suggested they were subscribed to the service, which many consumers dismissed as spam. Even if consumers responded via text indicating they did not want the services, they were charged on their mobile phone bills on an ongoing basis, the agency said.

“Defendants’' purported services have included sending periodic text messages containing horoscope alerts, ‘flirting tips,’ ‘love tips’ and similar kinds of information,” the complaint said. “Using the billing mechanisms of mobile phone companies, Defendants cause unauthorized charges for these services to be placed on consumers’' mobile phone bills, often with abbreviated and uninformative descriptions.”

The agency said that the charges often go unnoticed by consumers, who pay their mobile telephone bills without closely scrutinizing them. “Others pay and then unsuccessfully dispute the third-party charge without obtaining a refund; still others dispute the charges and succeed in having them removed only after substantial effort,” the agency said.

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