FCC Takes on Shady Practice of Cramming

The Federal Communications Commission is targeting the illegal practice of cramming, and no, its not the type that involves late-night study sessions in your favorite college dorm.

In an effort to rein in cramming -- the unauthorized placement of fees on consumers monthly phone bills -- the FCC unveiled proposed rules this week, including one that would require landline phone companies to clearly give customers the option to block third-party charges.

Most people dont know what they are -- they just pay them blindly, said Jordan Goodman, a personal finance expert who runs moneyanswers.com. This is going to make it much clearer. Hopefully, it should help people save money and not be ripped off.

So what exactly is cramming?

Its the shady practice by companies to place phony charges on consumers phone bills landline or mobile. They range anywhere from $1.99 to $19.99 a month and are typically buried deep inside bills in an effort to deceive customers.

Often, cramming charges are described on bills as simply service fees or service charges. Other times they are described as monthly, voicemail, or calling plan fees.

Billions Wasted in Scams

Despite previous attempts to stop the practice, cramming remains a serious problem for landline phone customers and an emerging one in the mobile world.

The FCC, which recently penalized four phone operators $11.7 million for cramming, said it believes an estimated 15 to 20 million American households may be victims of mystery fees on their landline bills every year. One survey shows only 5% of consumers who are victims even realize it.

According to a new Senate study released Wednesday, Americans could be paying upwards of $2 billion a year to third-party vendors who attach charges to monthly phone bills, usually without the customer's authorization. Phone companies place about 300 million third-party charges on bills each year, the study showed.

"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 a Senate hearing on the topic Wednesday.

As part of the rule changes proposed on Tuesday, the FCC would require landline telephone companies to notify subscribers clearly and conspicuously of the option to block third-party charges from their bills, if the carrier offers that option. The FCC would also strengthen its requirement that third-party charges be separated on bills from the carriers charges.

Additionally, both landline and mobile companies would be forced to include the FCC's contact info on bills and web sites to allow customers to easily call and complain.

The FCCs proposed rules are designed to help consumers detect cramming by highlighting third-party charges on the bill; prevent cramming by using blocking options where they are available; and seek redress by complaining to the FCC if necessary, the commission said in a statement.

Meanwhile, the FCC said it is mulling a number of tougher rules, including requiring landline companies offer the option of blocking third-party charges, mandating companies notify consumers if they arent already blocking charges, prohibiting additional fees for blocking services and blocking third-party charges altogether.

The FCC may also propose rules that would require landline and mobile phone companies provide accurate contact info for third parties and screen for prior rule violations.

What Consumers Can do

While the FCC mulls a slew of new regulations, consumers are encouraged to scour their telephone bills each month in search of mysterious charges.

The FCC encourages customers ask themselves these four questions:

1.) Do I recognize the names of all the companies listed on my bill?

2.) What services were provided by the listed companies?

3.) Does my bill include charges for calls I did not place and services I did not authorize?

4.) Are the rates and line items consistent with the rates and line items that the company quoted me on?

Additionally, customers should keep a record of telephone services they have signed off on and carefully read the fine print before authorizing new ones.

If consumers realize they are a victim of cramming, they should immediately call the company that made the mysterious charges and asking for an explanation and adjustment. Consumers should also reach out to the phone company to inquire about how to remove phony charges.

If neither of those steps work, consumers can file a complaint with the FCC for telephone-related charges between states or internationally, a state public service commission for in-state telephone services or with the Federal Trade Commission for non-phone services.

For more tips about what cramming looks like and how to file a complaint go to the FCCs guide.

FCC Clamps Down on Cramming

Last month the FCC proposed $11.7 million in penalties against four companies accused of cramming tens of thousands of customers: Main Street Telephone, VoiceNet Telephone, Cheap2Dial Telephone and Norristown Telephone.

Cramming attacks consumers in the pocketbook, where it really hurts, Michele Ellison, an enforcement official at the FCC, said at the time.  The Enforcement Bureau takes todays actions to protect thousands of consumers who appear to have been hoodwinked into paying for services they never wanted, ordered, or used.

Additionally, the FCC reached a $50 million settlement with Verizon Wireless for mystery fees placed on bills by Verizon itself. Verizon, which is owned by Verizon (NYSE:VZ) and Vodafone (NYSE:VOD), said it would refund the phony charges and make a voluntary payment of $25 million to the U.S.

At the same time, the FTC has been investigating third parties that engage in cramming and a Senate panel is probing the matter as well.

Some believe phone companies have turned a blind eye on the practice of cramming.

"While all the telephone companies have anticramming policies, they haven't made a serious effort to keep the crammers off their phone bills," Sen. Jay Rockefeller, chairman of the Senate Commerce Committee, said at Wednesday's hearing. "According to financial information my staff has reviewed, telephone companies earn a dollar or two every time they place a third-party charge on their customers bills."

Verizon, for one, denies that it tolerates cramming and said out of the 1 million bills that include third-party charges each month, cramming complaints represent less than 1% of overall bills.

"Verizon runs a risk of losing customers when cramming happens, and we take an aggressive stance with third party service providers," the company said in a statement. The company warned that banning or substantially restricting third-party charges would "harm the overwhelming number of customers"  who prefer to pay a single bill.